Shares of Common Stock RESPONSE GENETICS, INC. UNDERWRITING AGREEMENT
_________
Shares of Common Stock
RESPONSE
GENETICS, INC.
__________________,
2007
MAXIM
GROUP LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
As
Representative of the Underwriters
named
on Schedule
A
hereto
Ladies
and Gentlemen:
Response
Genetics, Inc., a corporation organized and existing under the laws of Delaware
(the “Company”),
confirms its agreement, subject to the terms and conditions set forth herein,
with each of the underwriters listed on Exhibit A hereto (collectively, the
“Underwriters”),
for
whom Maxim Group LLC is acting as representative (in such capacity, the
“Representative”),
to
sell and issue to the Underwriters an aggregate of _______ shares (the
“Firm
Shares”)
of its
common stock, $0.01 par value per share (the “Common
Stock”).
In
addition, the Company shall grant to the Underwriters, upon the terms and
conditions set forth in Section 2 hereof, an option to purchase up to an
aggregate additional amount of _________ shares of Common Stock, representing
up
to 15% of the Firm Shares (the “Additional
Shares”).
The
Firm Shares and any Additional Shares purchased by the Underwriters are referred
to herein as the “Shares.”
In
addition, the Company shall, at the Closing (as defined herein) issue to the
Representative a warrant (the “Representative’s
Warrant”)
to
purchase up to ________ shares of Common Stock (10% of the number of Firm Shares
sold in the Offering). The Shares and the Representative’s Warrant are more
fully described in the Registration Statement and Prospectus referred to below.
The offering and sale of the Shares contemplated by this underwriting agreement
(this “Agreement”)
is
referred to herein as the “Offering.”
1. Representations
and Warranties of the Company.
The
Company represents, warrants and covenants to, and agrees with, each of the
Underwriters that, as of the date hereof and as of the Closing Date and each
Additional Closing Date:
(a) The
Company has filed with the Securities and Exchange Commission (the “Commission”)
a
registration statement on Form SB-2 (Registration No. 333-139534), and
amendments thereto, and related preliminary prospectuses for the registration
under the Securities Act of 1933, as amended (the “Securities
Act”),
of
the Shares, which registration statement, as so amended (including
post-effective amendments, if any), has been declared effective by the
Commission and copies of which have heretofore been delivered to the
Underwriters. Promptly after execution and delivery of this Agreement, the
Company will prepare and file a prospectus in accordance with the provisions
of
Rule 430A (“Rule
430A”)
of the
rules and regulations of the Commission (the “Rules
and Regulations”)
and
paragraph (b) of Rule 424 (“Rule
424(b)”)
of the
Regulations. The information included in such prospectus that was omitted from
such registration statement at the time it became effective but that is deemed
to be part of such registration statement at the time it became effective
pursuant to paragraph (b) of Rule 430A is referred to as “Rule
430A Information.”
Each
prospectus used before such registration statement became effective, and any
prospectus that omitted the Rule 430A Information that was used after such
effectiveness and prior to the execution and delivery of this Agreement, is
referred to herein as a “Preliminary
Prospectus.”
Such
registration statement, including the amendments thereto, the exhibits and
any
schedules thereto, at the time it became effective, and including the Rule
430A
Information, is herein called the “Registration
Statement.”
The
Preliminary Prospectus dated _________________, 2007, that was included in
the
Registration Statement at the Time of Sale is referred to herein as the
“Sale
Preliminary Prospectus”,
except
that if any revised prospectus or prospectus supplement shall be provided to
the
Underwriters by the Company for use in connection with the Offering which
differs from the Sale Preliminary Prospectus (whether or not such revised
prospectus or prospectus supplement is required to be filed by the Company
pursuant to Rule 424(b)), the term “Prospectus” shall also refer to such revised
prospectus or prospectus supplement, as the case may be, from and after the
time
it is first provided to the Underwriters for such use. For purposes of this
Agreement and the Securities Act, “Time
of Sale”,
means
4:30 p.m., New York City time, on the date of this Agreement.
The
final prospectus in the form first furnished to the Underwriters for use in
connection with the offering of the Securities is referred to herein as the
“Prospectus.”
If
the
Company has filed or is required pursuant to the terms hereof to file a
registration statement pursuant to Rule 462(b) under the Securities Act
registering additional shares of Common Stock (a “Rule
462(b) Registration Statement”),
then,
unless otherwise specified, any reference herein to the term “Registration
Statement” shall be deemed to include such Rule 462(b) Registration Statement.
All of the Shares have been registered under the Securities Act pursuant to
the
Registration Statement or, if any Rule 462(b) Registration Statement is filed,
will be duly registered under the Securities Act with the filing of such Rule
462(b) Registration Statement. Based on communications from the Commission,
no
stop order suspending the effectiveness of either the Registration Statement
or
the Rule 462(b) Registration Statement, if any, has been issued and, to the
Company’s knowledge, no proceeding for that purpose has been initiated or
threatened by the Commission. Any reference herein to the Registration
Statement, any Preliminary Prospectus, the Sale Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the exhibits incorporated
by
reference therein pursuant to the Rules and Regulations on or before the
effective date of the Registration Statement, the date of such Preliminary
Prospectus, the Sale Preliminary Prospectus or the date of the Prospectus,
as
the case may be. Any reference herein to the terms “amend”, “amendment” or
“supplement” with respect to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include: (i) the
filing of any document under the Securities Exchange Act of 1934, as amended,
and together with the Rules and Regulations promulgated thereunder (the
“Exchange
Act”)
after
the effective date of the Registration Statement, the date of such Preliminary
Prospectus, the Sale Preliminary Prospectus or the date of the Prospectus,
as
the case may be, which is incorporated therein by reference, and (ii) any such
document so filed. All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, a Preliminary Prospectus,
the
Sale Preliminary Prospectus and the Prospectus, or any amendments or supplements
to any of the foregoing shall be deemed to include any copy thereof filed with
the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System (“▇▇▇▇▇”).
The
Sale Preliminary Prospectus and the Prospectus delivered to the Underwriters
for
use in connection with the Offering were or will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant
to
▇▇▇▇▇, except to the extent permitted by Regulation S-T promulgated by the
Commissioner. If, subsequent to the date of this Agreement, the Company or
the
Representative determine that, at the Time of Sale, the Sale Preliminary
Prospectus included an untrue statement of a material fact or omitted a
statement of material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading and have
agreed to provide an opportunity to purchasers of the Firm Units to terminate
their old purchase contracts and enter into new purchase contracts, then the
Sale Preliminary Prospectus will be deemed to include any additional information
available to purchasers at the time of entry into the first such new purchase
contract.
Maxim
Group LLC
_________
__, 2007
Page
2 of
42
(b) At
the
time of the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement or the effectiveness of any post-effective amendment
to
the Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 424(b), when any supplement to or amendment of
the
Prospectus is filed with the Commission, when any document filed under the
Exchange Act was or is filed and at the Closing Date and the Additional Closing
Date (as hereinafter respectively defined), if any, the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus and any amendments thereof
and supplements or exhibits thereto complied or will comply in all material
respects with the applicable provisions of the Securities Act, the Exchange
Act
and the Rules and Regulations, and did not and will not contain an untrue
statement of a material fact and did not and will not omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein: (i) in the case of the Registration Statement, not misleading, and
(ii)
in the case of the Sale Preliminary Prospectus or the Prospectus in light of
the
circumstances under which they were made, not misleading. When any Preliminary
Prospectus (including the Sale Preliminary Prospectus) was first filed with
the
Commission (whether filed as part of the registration statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a)
under the Securities Act), and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied in all material respects
with the applicable provisions of the Securities Act, the Exchange Act and
the
Rules and Regulations and did not contain an untrue statement of a material
fact
and did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. No representation and warranty
is
made in this subsection (b), however, with respect to any information contained
in or omitted from the Registration Statement or the Prospectus or any related
Preliminary Prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through the Representative
specifically for use therein. The parties acknowledge and agree that such
information provided by or on behalf of any Underwriter consists solely of
the
names of the Underwriters appearing in the “Underwriting” section of the
Prospectus and the following additional disclosure contained in the
“Underwriting” section of the Prospectus: (i) the fourth paragraph under the
heading “Nature of Underwriting Commitment”, (ii) the second paragraph under the
heading “Lock-Ups”, (iii) the final paragraph under the heading “Stabilization”
and (iv) all paragraphs under the heading “Foreign Regulatory Restrictions on
Purchase of Shares” (collectively, the “Underwriters’
Information”).
Maxim
Group LLC
_________
__, 2007
Page 3 of
42
(c) The
Company has filed with the Commission a Form 8-A (File Number 000-____________)
providing for the registration under the Exchange Act of the Common Stock.
The
registration of the Common Stock under the Exchange Act has been declared
effective by the Commission on the date hereof.
(d) The
documents, exhibits or other materials incorporated or deemed to be
incorporated by reference
in the
Sale Preliminary Prospectus or the Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply
in all
material respects
with the
requirements of the Securities Act, the Exchange Act and the Rules and
Regulations, and, when read together with the other information in the Sale
Preliminary Prospectus or the Prospectus, do not contain an untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
There
are no contracts or other documents (including, without limitation, any voting
agreement), which are required to be described in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus or filed as exhibits to
the
Registration Statement by the Securities Act, the Exchange Act or the Rules
and
Regulations and which have not been so described, filed or incorporated by
reference.
(e) Singer
Lewak ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP (“SLGG”),
whose
reports relating to the Company are included in the Registration Statement,
are
independent public accountants as required by the Securities Act, the Exchange
Act, the Rules and Regulations and the rules and regulations promulgated by
the
Public Company Accounting Oversight Board (the “PCAOB”).
SLGG
is duly registered and in good standing with the PCAOB. SLGG has not, during
the
periods covered by the financial statements included in the Registration
Statement, the Preliminary Prospectus and the Prospectus, provided to the
Company any non-audit services, as such term is used in Section 10A(g) of the
Exchange Act.
(f) The
Shares have been authorized for listing on the Nasdaq Capital Market
(“NCM”)
and,
to the Company’s knowledge, no proceedings have been instituted or threatened
which would effect, and no event or circumstance has occurred which is
reasonably likely to effect, the listing of the Shares on the NCM.
(g) Except
for Response Genetics, Ltd. (the “Subsidiary”),
the
Company has no direct or indirect subsidiaries and owns no equity interest
in
any other foreign or domestic individual, corporation, trust, general or limited
partnership, joint venture, limited liability company or other entity (each,
a
“Person”).
Unless the context specifically requires otherwise, the term “Company” as used
in this Agreement means the Company and the Subsidiary collectively on a
consolidated basis.
Maxim
Group LLC
_________
__, 2007
Page 4 of
42
(h) Subsequent
to the respective dates as of which information is presented in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus, and except as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus: (i) the Company has not declared, paid or made any dividends or
other distributions of any kind on or in respect of its capital stock, and
(ii)
there has been no material adverse change (or, to the knowledge of the Company,
any development which has a high probability of involving a material adverse
change in the future), whether or not arising from transactions in the ordinary
course of business, in or affecting: (A) the business, condition (financial
or
otherwise), results of operations, shareholders’ equity, properties or prospects
(as such prospects are disclosed or described in the Sale Preliminary Prospectus
and the Prospectus) of the Company; (B) the long-term debt or capital stock
of
the Company; or (C) the Offering or consummation of any of the other
transactions contemplated by this Agreement, the Registration Statement or
the
Prospectus (a “Material
Adverse Change”).
Since
the date of the latest balance sheet presented in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus, the Company has not incurred
or undertaken any liabilities or obligations, whether direct or indirect,
liquidated or contingent, matured or unmatured, or entered into any
transactions, including any acquisition or disposition of any business or asset,
which are material to the Company, except for liabilities, obligations and
transactions which are disclosed in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus.
(i) As
of the
dates indicated in the Sale Preliminary Prospectus and the Prospectus, the
authorized, issued and outstanding shares of capital stock of the Company were
as set forth therein in the column headed “Actual” under the section thereof
captioned “Capitalization” and, after giving effect to the Offering and the
other transactions contemplated by this Agreement and the Registration
Statement, will be as set forth in the columns headed “Pro Forma” and “Pro Forma
As Adjusted” in such section.
(j) All
of
the issued and outstanding shares of capital stock of the Company (including,
without limitation, the Company’s Series A Junior Convertible Preferred Stock
and Series B Convertible Preferred Stock) are fully paid and non-assessable
(and
those shares of Common Stock issuable upon conversion of the Company’s notes,
Series A Junior Convertible Preferred Stock and Series B Convertible Preferred
Stock as described in the Registration Statement and the Prospectus, upon
conversion thereof as described in the Registration Statement, will be fully
paid and non-assessable) and have been duly and validly authorized and issued,
in compliance with all applicable state, federal and (except as disclosed in
the
Sale Preliminary Prospectus and the Prospectus) foreign securities laws, rules
and regulations and not in violation of or subject to any preemptive or similar
right that does or will entitle any Person (as defined below), upon the issuance
or sale of any security, to acquire any Relevant Security from the Company.
As
used herein, the term “Relevant
Security”
means
any Common Stock or other security of the Company that is convertible into,
or
exercisable or exchangeable for Common Stock or equity securities, or that
holds
the right to acquire any Common Stock or equity securities of the Company or
any
other such Relevant Security, except for such rights as may have been fully
satisfied or waived prior to the effectiveness of the Registration Statement.
Maxim
Group LLC
_________
__, 2007
Page 5 of
42
(k) The
Shares have been duly and validly authorized and, when issued,
delivered
and
paid
for in
accordance with this Agreement
and as
described in the Sale Preliminary Prospectus and the Prospectus on each of
the
Closing Date and the Additional Closing Date, as applicable, will
be
duly and validly issued, fully paid and non-assessable, will have been issued
in
compliance with all applicable state and federal and foreign laws, rules and
regulations and will not have been issued in violation of or subject to any
preemptive or similar right that does or will entitle any Person to acquire
any
Relevant Security from the Company upon issuance or sale of Shares in the
Offering. The shares of Common Stock representing the Shares conform to the
descriptions thereof contained in the Registration Statement and the Sale
Preliminary Prospectus and the Prospectus. Except as disclosed in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus,
the
Company has no outstanding warrants, options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, or any contracts or
commitments to issue or sell, any Relevant Security.
(l) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, no director or officer of the Company named in the Sale Preliminary
Prospectus and the Prospectus and/or who will be acting as such following the
Closing as described in the Sale Preliminary Prospectus or the Prospectus holds
any direct equity, debt or other pecuniary interest in any Person with whom
the
Company does business or is in privity of contract with, other than, in each
case, indirectly through the ownership by such individuals of shares of Common
Stock
(m) The
Company has been duly incorporated, and validly exists as a corporation in
good
standing under the laws of the State of Delaware. The Subsidiary has been duly
incorporated, and validly exists as a corporation in good standing under the
laws of the jurisdiction of incorporation. The Company and the Subsidiary have
all requisite power and authority to carry on their respective businesses as
currently being conducted and as described in the Sale Preliminary Prospectus
and the Prospectus, and to own, lease and operate their respective properties.
The Company and the Subsidiary are duly qualified to do business and are in
good
standing as a foreign corporation in each jurisdiction in which the character
or
location of their properties (owned, leased or licensed) or the nature or
conduct of their business makes such qualification necessary, except, in each
case, for those failures to be so qualified or in good standing which
(individually and in the aggregate) could not reasonably be expected to have
a
material adverse effect on: (i) the business, condition (financial or
otherwise), results of operations, shareholders’ equity, properties or prospects
(as such prospects are disclosed or described in the Sale Preliminary Prospectus
and the Prospectus) of the Company; (ii) the long-term debt or capital stock
of
the Company; or (iii) the Offering or consummation of any of the other
transactions contemplated by this Agreement, the Registration Statement or
the
Prospectus (any such effect being a “Material
Adverse Effect”).
Maxim
Group LLC
_________
__, 2007
Page 6 of
42
(n) The
Company and the Subsidiary are not: (i) in violation of their certificate of
incorporation, by-laws or other organizational documents (including
shareholders’, voting or similar agreements), (ii) in default under, and no
event has occurred which, with notice or lapse of time or both, would constitute
a default under or result in the creation or imposition of any lien, charge,
mortgage, pledge, security interest, claim, equity, trust or other encumbrance,
preferential arrangement, defect or restriction of any kind whatsoever
(“Lien”)
upon
any of their property or assets pursuant to, any indenture, mortgage, deed
of
trust, loan agreement or other agreement or instrument to which they are a
party
or by which they are bound or to which any of their property or assets is
subject or (iii) is in violation in any respect of any law, rule, regulation,
ordinance, directive, judgment, decree or order of any judicial, regulatory
or
other legal or governmental agency or body, foreign or domestic, except (in
the
case of clause (ii) above) for any Lien disclosed in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus and except, in the case
of
each of clauses (ii) and (iii), for any default, violation or event that would
not, individually or in the aggregate, have or reasonably be expected to have
a
Material Adverse Effect.
(o) The
Company has full right, power and authority to execute and deliver this
Agreement, the Representative’s Warrant and all other agreements, documents,
certificates and instruments required to be delivered pursuant to this Agreement
(collectively, the “Transaction
Documents”)
and to
perform its obligations hereunder and thereunder and to consummate each of
the
transactions contemplated by each of the Transaction Documents. The Company
has
duly and validly authorized each of the Transaction Documents and each of the
transactions contemplated by the Transaction Documents. Each of the Transaction
Documents have been or will be duly and validly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company
and is enforceable against the Company in accordance with its terms, except
as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(p) The
execution, delivery, and performance of the Transaction Documents and the
consummation of the transactions contemplated thereby do not and will not:
(i)
conflict with, require consent under or result in a breach of any of the terms
and provisions of, or constitute a default (or an event which with notice or
lapse of time, or both, would constitute a default) under, or result in the
creation or imposition of any Lien upon any property or assets of the Company
pursuant to any indenture, mortgage, deed of trust, loan agreement or other
agreement, instrument, franchise, license or permit to which the Company or
its
“affiliates” (as such term is defined in Rule 144 under the Securities Act,
“Affiliates”)
is a
party or by which the Company or its properties, operations or assets may be
bound or (ii) violate or conflict with any provision of the certificate of
incorporation, by-laws or other organizational documents of the Company, or
(iii) violate or conflict with any law, rule, regulation, ordinance, directive,
judgment, decree or order of any judicial, regulatory or other legal or
governmental agency or body, domestic or foreign, except, in the case of each
of
clauses (i) and (iii), for any default, violation or event that would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.
Maxim
Group LLC
_________
__, 2007
Page 7 of
42
(q) The
Company has all material consents, approvals, authorizations, orders,
registrations, qualifications, licenses, filings and permits of, with and from
all judicial, regulatory and other legal or governmental agencies and bodies
and
all third parties, foreign and domestic (collectively, the “Consents”),
to
own, lease and operate its properties and conduct its business as it is now
being conducted and as disclosed in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus, and each such Consent is valid and
in
full force and effect.
The
Company has not received notice of any investigation or proceedings which
results in or, if decided adversely to the Company, could reasonably be expected
to result in, the revocation of any Consent or reasonably be expected to have
a
Material Adverse Effect. No
Consent contains a materially burdensome restriction not adequately disclosed
in
the Registration Statement, the Sale Preliminary Prospectus and the
Prospectus.
(r) The
Company is in compliance with all applicable laws, rules, regulations,
ordinances, directives, judgments, decrees and orders, foreign and domestic,
including those relating to transactions with Affiliates, the non-compliance
with which would not have a Material Adverse Effect.
(s) The
Representative’s Warrant will conform to the description thereof in the
Registration Statement and in the Prospectus and, when sold to and paid for
by
the Representative in accordance with the Representative’s Warrant, will have
been duly authorized and validly issued and will constitute a valid and binding
obligation of the Company. The shares of Common Stock issuable upon exercise
of
the Representative’s Warrant (the “Representative’s
Warrant Shares”)
have
been duly authorized and reserved for issuance upon exercise of the
Representative’s Warrant by all necessary corporate action on the part of the
Company and, when issued and delivered and paid for upon such exercise in
accordance with the terms of the Representative’s Warrant, will be validly
issued, fully paid, nonassessable and free of preemptive rights and will conform
to the description thereof in the Prospectus.
(t) No
Consent of, with or from any judicial, regulatory or other legal or governmental
agency or body or any third party, foreign or domestic, is required for the
execution, delivery and performance of this Agreement and the Representative’s
Warrant or consummation of each of the transactions contemplated by this
Agreement and the Representative’s Warrant, including the issuance, sale and
delivery of the Shares and the Representative’s Warrant Shares to be issued,
sold and delivered hereunder and thereunder, except: (i) the registration under
the Securities Act of the Shares and the Representative’s Warrant Shares and the
approval for listing of the Shares on the NCM, each of which has become
effective and (ii) such Consents as may be required under state securities
or
blue sky laws, the National Association of Securities Dealers, Inc. (the
“NASD”)
or
NASD Regulation, Inc. in connection with the purchase and distribution of the
Shares by the Underwriters.
Maxim
Group LLC
_________
__, 2007
Page 8 of
42
(u) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, there is no judicial, regulatory, arbitral or other legal or
governmental proceeding or other litigation or arbitration, domestic or foreign,
pending to which the Company is a party or of which any property, operations
or
assets of the Company is the subject which, either individually or in the
aggregate, if determined adversely to the Company, could reasonably be expected
to have a Material Adverse Effect. To the Company’s knowledge, no such
proceeding, litigation or arbitration is threatened or contemplated. The defense
of all actual or pending proceedings, litigation and arbitration against or
involving the Company is not reasonably expected by the Company to have a
Material Adverse Effect.
(v) The
financial statements, including the notes thereto, and any supporting schedules
included in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus present fairly the financial position as of the dates indicated
and
the cash flows and results of operations for the periods specified of the
Company. Except as otherwise stated in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus, said financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis throughout the periods involved. Any
supporting schedules included in the Registration Statement and the Prospectus
present fairly the information required to be stated therein. No other financial
statements or supporting schedules are required to be included or incorporated
by reference in the Registration Statement. The other financial and statistical
information included in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus present fairly the information included therein
and have been prepared on a basis consistent with that of the financial
statements that are included in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus and the books and records of the respective
entities presented therein.
(w) There
are
no pro forma or as adjusted financial statements which are required to be
included in
the
Registration Statement, the
Sale
Preliminary Prospectus
and
the
Prospectus in accordance with Regulation
S-X under the Securities Act which have not been included as so required. The
pro forma and/or as adjusted financial information included in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus has been properly
compiled and prepared in accordance with the applicable requirements of the
Securities Act and the Rules and Regulations and include all adjustments
necessary to present fairly in accordance with generally accepted accounting
principles the pro forma and as adjusted financial position of the respective
entity or entities presented therein at the respective dates indicated and
their
cash flows and the results of operations for the respective periods specified.
The assumptions used in preparing the pro forma and as adjusted financial
information included in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events
described therein. The related pro forma and pro forma as adjusted adjustments
give appropriate effect to those assumptions; and the pro forma and pro forma
as
adjusted financial information reflect the proper application of those
adjustments to the corresponding historical financial statement
amounts.
Maxim
Group LLC
_________
__, 2007
Page 9 of
42
(x) The
statistical, industry-related and market-related data included in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus
are
based on or derived from sources which the Company reasonably and in good faith
believes are reliable and accurate, and such data agree with the sources from
which they are derived.
(y) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, the Company maintains a system of internal accounting and other
controls sufficient to provide reasonable assurances that: (i) transactions
are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with United States generally accepted accounting
principles and to maintain accountability for assets, (iii) access to assets
is
permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accounting for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) The
Company’s Board of Directors has validly appointed an audit committee and
nominating committee whose composition satisfies the requirements of the rules
and regulations of the NCM and the Company’s Board of Directors and/or audit
committee and the nominating committee has each adopted a charter that satisfies
the requirements of NCM. Neither the Company’s Board of Directors nor the audit
committee thereof has been informed, nor is any director of the Company aware,
of: (i) except as disclosed in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus, any significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Company’s ability
to record, process, summarize and report financial information; or (ii) any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the Company’s internal control over financial
reporting.
(aa) The
Company is in material compliance with the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act
of 2002, as amended (“Sarb-Ox”)
applicable to the Company, and the rules and regulations promulgated thereunder
and related or similar rules and regulations promulgated by NCM or any other
governmental or self regulatory entity or agency, except for violations which,
singly or in the aggregate, would not have a Material Adverse Effect.
(bb) No
relationship, direct or indirect, exists between or among any of the Company
or
any Affiliate of the Company, on the one hand, and any director, officer,
shareholder, customer or supplier of the Company or any Affiliate of the
Company, on the other hand, which is required by the Securities Act, the
Exchange Act or the Rules and Regulations to be described in the Registration
Statement, the Sale Preliminary Prospectus or the Prospectus which is not so
described as required. Except as disclosed in the Registration Statement, the
Sale Preliminary Prospectus and the Prospectus, there are no outstanding loans,
advances (except normal advances for business expenses in the ordinary course
of
business) or guarantees of indebtedness by the Company to or for the benefit
of
any of the officers or directors of the Company or any of their respective
family members, except as disclosed in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus. The Company has not, in violation
of
Sarb-Ox, directly or indirectly, including through any Affiliate of the Company
(other than as permitted under the Sarb-Ox for depositary institutions),
extended or maintained credit, arranged for the extension of credit, or renewed
an extension of credit, in the form of a personal loan to or for any director
or
executive officer of the Company.
Maxim
Group LLC
_________
__, 2007
Page 10 of
42
(cc) Transactions
Affecting Disclosure to NASD.
(i) Except
as
described in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, there are no claims, payments, arrangements, agreements or
understandings relating to the payment of a finder’s, consulting or origination
fee by the Company with respect to the sale of the Shares hereunder or any
other
arrangements, agreements or understandings of the Company or, to the Company’s
knowledge, the Company’s officers, directors and employees that may affect the
Underwriters’ compensation, as determined by the NASD.
(ii) Except
as
previously disclosed by the Company to the Representative in writing, no
officer, director, or beneficial owner of 5% or more of any class of the
Company’s securities (whether debt or equity, registered or unregistered,
regardless of the time acquired or the source from which derived) or any other
Affiliate is a member or a person associated, or affiliated with a member of
the
NASD.
(iii) No
proceeds from the sale of the Shares (excluding underwriting compensation)
will
be paid to any NASD member, or any persons associated or affiliated with a
member of the NASD, except as specifically contemplated herein.
(iv) Except
as
previously disclosed by the Company to the Representative, no person to whom
securities of the Company have been privately issued within the 180-day period
prior to the initial filing date of the Registration Statement has any
relationship or affiliation or association with any member of the
NASD.
(dd) Intellectual
Property.
(i) The
Company owns, licenses or possess the right to use sufficient trademarks, trade
names, patents, patent rights, copyrights, domain names, licenses, approvals,
trade secrets, inventions, technology, know-how and other similar rights
(collectively, “Intellectual
Property Rights”)
as are
reasonably necessary or material to conduct its business as now conducted and
contemplated to be conducted, each as described in the Registration Statement,
the Sale Preliminary Prospectus and Prospectus.
(ii) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus and
Prospectus: (A) there is no actual, pending or, to the Company’s knowledge,
threatened action, suit, proceeding, or claim by others challenging the
Company’s rights in or to any Intellectual Property Rights, and the Company is
unaware of any facts which would form a reasonable basis for any such claim;
(B)
there is no actual, pending or, to the Company’s knowledge, threatened action,
suit, proceeding, or claim by others that the Company infringes,
misappropriates, or otherwise violates any Intellectual Property Rights of
others, and the Company is unaware of any facts which would form a reasonable
basis for any such claim; (C) there is no actual, pending or, to the Company’s
knowledge, threatened action, suit, proceeding, or claim by others challenging
the validity or scope of any such Intellectual Property Rights owned by the
Company and the Company is unaware of any facts which would form a reasonable
basis for any such claim; (D) the operation of Company’s business as now
conducted and in connection with the development and commercialization of its
technology described in the Registration Statement, the Sale Preliminary
Prospectus and Prospectus does not infringe any claim of any patent or published
patent application; (E) there is no prior art of which the Company is aware
that
may render any patent owned or licensed by the Company invalid or any patent
application owned or licensed by the Company unpatentable which has not been
disclosed to the applicable government patent office; and (F) the patents,
trademarks, and copyrights granted or issued to the Company have been duly
maintained and are in full force and in effect, and none of such patents,
trademarks and copyrights have been adjudged invalid or unenforceable in whole
or in part. The Company is not a party to or bound by any options, licenses
or
agreements with respect to the Intellectual Property Rights of any other person
or entity that are required to be set forth in the Registration Statement,
the
Sale Preliminary Prospectus and Prospectus and are not described therein in
all
material respects.
Maxim
Group LLC
_________
__, 2007
Page 11 of
42
(iii) 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”).
The
Company has complied in all material respects with the PTO’s duty of candor and
disclosure for the Company Patent Applications and has made no material
misrepresentation in the Company Patent Applications. The Company Patent
Applications disclose patentable subject matters, and 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 invalid or unenforceable. Except with respect to the rights
of the University of Southern California as described in the Sale Preliminary
Prospectus and Prospectus, no third party possesses rights to the Company’s
Intellectual Property Rights that, if exercised, could enable such party to
develop products competitive to those the Company intends to develop as
described in the Sale Preliminary Prospectus and the Prospectus.
(iv) Other
than as disclosed in the Registration Statement, the Sale Preliminary Prospectus
and Prospectus, to the knowledge of the Company, there are no rulemaking or
similar proceedings before the U.S. Food and Drug Administration (“FDA”)
or PTO
which affect or involve the Company or any of the processes or technologies
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 result in a Material Adverse Change.
Maxim
Group LLC
_________
__, 2007
Page
12 of
42
(v) The
Company has obtained legally binding written agreements from all employees
and
third parties with whom the Company has shared confidential proprietary
information: (A) of the Company, or (B) received from others which the Company
is obligated to treat as confidential, which agreements require such employees
and third parties to keep such information confidential.
(vi) Except
as
would not have a Material Adverse Effect, the Company is and its operations
have
been conducted at all times in compliance with foreign, federal, state and
municipal laws, rules and regulations as required by such laws for each activity
and in each jurisdiction where the Company is doing business. The Company
possesses valid and current licenses, registrations, certificates, permits
and
other authorizations issued by the appropriate foreign, federal, state or local
regulatory authorities as necessary to conduct its respective businesses
(collectively, the “Licensing
Requirements”),
except where the failure of a Licensing Requirement would not have a Material
Adverse Effect. The Company has not received any notice of proceedings relating
to the revocation or modification of, or noncompliance with, any such license,
certificate, permit or authorization, which could result in a Material Adverse
Effect. Further, no action, suit or proceeding, other than routine audits,
by or
before any court or governmental agency, authority or body or any arbitrator
involving the Company with respect to the removal, revocation, suspension or
other termination of the authority to operate under the Licensing Requirements
is pending or, to the Company’s knowledge, threatened. The Company does not
believe that any pending audit is reasonably likely to result in the removal,
revocation, suspension or other termination of the Company’s authority to
operate under the Licensing Requirements.
(ee) Neither
the Company nor, to the Company’s knowledge, any of the Company’s directors,
officers or employees has violated: (i) the Bank Secrecy Act, as amended, (ii)
the Money Laundering Control Act of 1986, as amended, (iii) the Foreign Corrupt
Practices Act, or (iv) the Uniting and Strengthening of America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT
ACT)
Act of 2001, and/or the rules and regulations promulgated under any such law,
or
any successor law, except
for such violations which, singly or in the aggregate, would not have a Material
Adverse Effect.
(ff) Neither
the Company nor any of its Affiliates has, prior to the date hereof, made any
offer or sale of any securities which are required to be “integrated” pursuant
to the Securities Act or the Rules and Regulations with the offer and sale
of
the Shares pursuant to the Registration Statement.
(gg) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, no holder of any Relevant Security has any rights to require
registration of any Relevant Security as part or on account of, or otherwise
in
connection with, the offer and sale of the Shares contemplated hereby, and
any
such rights so disclosed have either been fully complied with by the Company
or
effectively waived by the holders thereof, and any such waivers remain in full
force and effect.
Maxim
Group LLC
_________
__, 2007
Page 13 of
42
(hh) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, no holder of any Relevant Security has any rights of rescission
of
similar rights with respect to the Relevant Securities held by them.
(ii) The
Company is not and, at all times up to and including consummation of the
transactions contemplated by this Agreement, and after giving effect to
application of the net proceeds of the Offering, will not be, subject to
registration as an “investment company” under the Investment Company Act of
1940, as amended, and is not and will not be an entity “controlled” by an
“investment company” within the meaning of such act.
(jj) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, there are no contracts, agreements or understandings between the
Company and any Person that would give rise to a valid claim against the Company
or any Underwriter for a brokerage commission, finder’s fee or other like
payment in connection with the transactions contemplated by this Agreement
or
any arrangements, agreements, understandings, payments or issuance with respect
to the Company or any of its officers, directors, shareholders, partners,
employees or Affiliates that may affect the Underwriters’ compensation as
determined by the NASD.
(kk) The
Company owns or leases all such properties as are necessary to the conduct
of
its business as presently operated and as proposed to be operated as described
in the Registration, the Sale Preliminary Prospectus and the Prospectus. The
Company has good and marketable title in fee simple to all real property and
good and marketable title to all personal property owned by it, in each case
free and clear of all Liens except such as are described in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus or such as do
not
(individually or in the aggregate) materially affect the business or prospects
of the Company. Any real property and buildings held under lease or sublease
by
the Company is held by under valid, subsisting and enforceable leases with
such
exceptions as are not material to, and do not interfere with, the use made
and
proposed to be made of such property and buildings by the Company. The Company
has not received any notice of any claim adverse to its ownership of any real
or
personal property or of any claim against the continued possession of any real
property, whether owned or held under lease or sublease by the Company.
(ll) The
Company maintains insurance of the types and in the amounts which are
customary
for companies engaged in similar businesses,
including, but not limited to: (i) directors’ and officers’ insurance (including
insurance
covering the Company, its directors and officers for liabilities or losses
arising in connection with this Offering, including, without limitation,
liabilities or losses arising under the Securities Act, the Exchange Act, the
Rules and Regulations and applicable foreign securities laws), (ii)
insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, (iii) business interruption insurance and (iv)
product liability insurance. The
Company maintains and will continue to maintain insurance (of which the Company
is the beneficiary) with at least $1,500,000
of
coverage of the life of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ for a period of three (3) years
from
the Closing Date with an
insurer rated at least AA or better in the most recent addition of “Best’s Life
Reports”.
There
are no claims by the Company under any policy or instrument described in this
paragraph as to which any insurance company is denying liability or defending
under a reservation of rights clause. All
of the
insurance policies described in this paragraph are in full force and
effect.
The
Company has not been refused any insurance coverage sought or applied for,
and
the Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
Maxim
Group LLC
_________
__, 2007
Page 14 of
42
(mm) The
Company has accurately prepared and timely filed all federal, state, foreign
and
other tax returns that are required to be filed by it and has paid or made
provision for the payment of all taxes, assessments, governmental or other
similar charges, including without limitation, all sales and use taxes and
all
taxes which the Company is obligated to withhold from amounts owing to
employees, creditors and third parties, with respect to the periods covered
by
such tax returns (whether or not such amounts are shown as due on any tax
return). No deficiency assessment with respect to a proposed adjustment of
the
Company’s federal, state, local or foreign taxes is presently in effect or is
pending or, to the Company’s knowledge, threatened. The accruals and reserves on
the books and records of the Company in respect of tax liabilities for any
taxable period not finally determined are adequate to meet any assessments
and
related liabilities for any such period and, since the date of the Company’s
most recent audited financial statements, the Company has not incurred any
material liability for taxes other than in the ordinary course of its business.
There is no tax lien, whether imposed by any federal, state, foreign or other
taxing authority, outstanding against the assets, properties or business of
the
Company.
(nn) No
labor
disturbance by the employees of the Company currently exists or is likely to
occur.
(oo) The
Company has at all times operated its business in material compliance with
all
Environmental Laws, and no material expenditures are or will be required in
order to comply therewith. The Company has not received any notice or
communication that relates to or alleges any actual or potential violation
or
failure to comply with any Environmental Laws that will result in a Material
Adverse Effect. As used herein, the term “Environmental
Laws”
means
all applicable laws and regulations, including any licensing, permits or
reporting requirements, and any action by a Federal state or local government
entity pertaining to the protection of the environment, protection of public
health, protection of worker health and safety, or the handling of hazardous
materials, including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et
seq., the Comprehensive Environmental Response, Compensation and Liability
Act
of 1980, 42 U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33
U.S.C. § 1321, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1, et
seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et
seq.
Maxim
Group LLC
_________
__, 2007
Page 15 of
42
(pp) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, the Company is not a party to an “employee benefit plan,” as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974
(“ERISA”)
which:
(i) is subject to any provision of ERISA and (ii) is or was at any time
maintained, administered or contributed to by the Company and covers any
employee or former employee of the Company or any ERISA Affiliate (as defined
hereafter). These plans are referred to collectively herein as the “Employee
Plans.”
For
purposes of this paragraph, “ERISA
Affiliate”
of
any
person or entity means any other person or entity which, together with that
person or entity, could be treated as a single employer under Section 414(m)
of
the Internal Revenue Code of 1986, as amended (the “Code”),
or is
an “affiliate,” whether or not incorporated, as defined in Section 407(d)(7) of
ERISA, of the person or entity.
(qq) The
Representative has been provided with written evidence of each employment,
severance or other similar arrangement or policy and each material plan or
arrangement providing for insurance coverage (including any self-insured
arrangements), workers’ compensation, disability benefits, severance benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits
or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation, or post-retirement
insurance, compensation or benefits which: (i) is not an Employee Plan, (ii)
is
entered into, maintained or contributed to, as the case may be, by the Company
or any of their respective ERISA Affiliates, and (iii) covers any employee
or
former employee of the Company or any of their respective ERISA Affiliates.
These contracts, plans and arrangements are referred to collectively in this
Agreement as the “Benefit
Arrangements.”
Each
Benefit Arrangement has been maintained in substantial compliance with its
terms
and with requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to that Benefit Arrangement.
(rr) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, there is no liability in respect of post-retirement health and
medical benefits for retired employees of the Company or any of their respective
ERISA Affiliates other than medical benefits required to be continued under
applicable law, determined using assumptions that are reasonable in the
aggregate, over the fair market value of any fund, reserve or other assets
segregated for the purpose of satisfying such liability (including for such
purposes any fund established pursuant to Section 401(h) of the Code). With
respect to any of the Company’s Employee Plans which are “group health plans”
under Section 4980B of the Code and Section 607(1) of ERISA, there has been
material compliance with all requirements imposed there under such that the
Company or their respective ERISA Affiliates have no (and will not incur any)
loss, assessment, tax penalty, or other sanction with respect to any such
plan.
(ss) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, and except with respect to the Company’s written agreements or
arrangements with certain Company employees (whose names and remuneration
arrangements with the Company have been previously disclosed in writing by
the
Company to the Representative), the Company is not a party to or subject to
any
employment contract or arrangement providing for annual future compensation,
or
the opportunity to earn annual future compensation (whether through fixed
salary, bonus, commission, options or otherwise) of more than $60,000 to any
officer, consultant, director or employee.
Maxim
Group LLC
_________
__, 2007
Page 16 of
42
(tt) The
execution of this Agreement, the Representative’s Warrant or any other
Transaction Document and consummation of the transactions contemplated hereby
and thereby does not constitute a triggering event under any Employee Plan
or
any other employment contract, whether or not legally enforceable, which (either
alone or upon the occurrence of any additional or subsequent event) will or
may
result in any payment (of severance pay or otherwise), acceleration, increase
in
vesting, or increase in benefits to any current or former participant, employee
or director of the Company.
(uu) No
“prohibited transaction” (as defined in either Section 406 of the ERISA or
Section 4975 of Code), “accumulated funding deficiency” (as defined in Section
302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement under
Section 4043 of ERISA has been waived) has occurred with respect to any employee
benefit plan for which the Company would have any liability; each employee
benefit plan of the Company is in compliance in all material respects with
applicable law, including (without limitation) ERISA and the Code; the Company
has not incurred and does not expect to incur liability under Title IV of ERISA
with respect to the termination of, or withdrawal from any “pension plan”; and
each employee benefit plan of the Company that is intended to be qualified
under
Section 401(a) of the Code is so qualified and nothing has occurred, whether
by
action or by failure to act, which could cause the loss of such qualification.
(vv) Neither
the Company nor, to the Company’s knowledge, any of the Company’s officers,
directors, employees or agents has at any time during the last five (5) years:
(i) made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or (ii) made
any
payment to any federal or state governmental officer or official, or other
Person charged with similar public or quasi-public duties, other than payments
that are not prohibited by the laws of the United States of any jurisdiction
thereof.
(ww) The
Company has not offered, or caused the Underwriters to offer, the Firm Shares
to
any Person or entity with the intention of unlawfully influencing: (i) a
customer or supplier of the Company or its Affiliates to alter the customer’s or
supplier’s level or type of business with the Company or any of its Affiliates
or (ii) a journalist or publication to write or publish favorable information
about the Company, any Affiliate or their respective products or
services.
(xx) Except
as
described in the Sale Preliminary Prospectus, the Prospectus and the
Registration Statement, the Company: (i) is and at all times has been in full
compliance with all statutes, rules, regulations or guidance applicable to
the
ownership, testing, development, manufacture, packaging, processing, use,
distribution, marketing, labeling, promotion, sale, offer for sale, storage,
import, export or disposal of any product manufactured, distributed or sold
by
the Company or any component thereof (such statutes, rules, regulations or
guidance, collectively, “Applicable
Laws”);
(ii)
has not received any notice of adverse finding, warning letter, untitled letter
or other correspondence or notice from the FDA or any other federal, state,
local or foreign governmental authority having authority over the Company
(“Governmental
Authority”)
alleging or asserting noncompliance with any Applicable Laws or any licenses,
certificates, approvals, clearances, authorizations, permits and supplements
or
amendments thereto required by any such Applicable Laws (“Authorizations”);
(iii)
possesses all Authorizations and such Authorizations are valid and in full
force
and effect and are not in violation of any term of any such Authorizations;
(iv)
has not received notice of any claim, suit, proceeding, hearing, enforcement,
audit, investigation, arbitration or other action from any Governmental
Authority or third party alleging that any product operation or activity is
in
violation of any Applicable Laws or Authorizations and has no knowledge that
any
such Governmental Authority or third party is considering any such claim, suit,
proceeding, hearing, enforcement, audit, investigation, arbitration or other
action; (v) has not received notice that any Governmental Authority has taken,
is taking or intends to take action to limit, suspend, modify or revoke any
Authorizations and has no knowledge that any such Governmental Authority is
considering such action; (vi) has filed, obtained, maintained or submitted
all
material reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any Applicable Laws
or
Authorizations and that all such material reports, documents, forms, notices,
applications, records, claims, submissions and supplements or amendments were
complete and correct in all material respects on the date filed (or were
corrected or supplemented by a subsequent submission), except, in the case
of
each of clauses (i), (ii) and (iii), for any default, violation or event that
would not, individually or in the aggregate, have or reasonably be expected
to
have a Material Adverse Effect..
Maxim
Group LLC
_________
__, 2007
Page 17 of
42
(yy) The
studies and tests conducted or sponsored by or on behalf of the Company that
are
described or referred to in the Sale Preliminary Prospectus, the Prospectus
and
the Registration Statement were and, if still pending, are being conducted
in
accordance with experimental protocols, procedures and controls pursuant to
accepted professional scientific standards and all Applicable Laws and
Authorizations; the descriptions of the results of such studies, tests and
trials contained in the Sale Preliminary Prospectus, the Prospectus and the
Registration Statement are accurate and complete in all material respects and
fairly present the data derived from such studies, tests and trials. The Company
is not aware of any studies or tests, the results of which the Company believes
reasonably call into question the study or test described or referred to in
the
Sale Preliminary Prospectus, the Prospectus and the Registration Statement
when
viewed in the context in which such results are described.
(zz) As
used
in this Agreement, references to matters being “material”
with
respect to the Company shall mean a material event, change, condition, status
or
effect related to the condition (financial or otherwise), properties, assets
(including intangible assets), liabilities, business, prospects (as such
prospects are disclosed or described in any Preliminary Prospectus or the
Prospectus), operations or results of operations of the Company and the
Subsidiary, taken as a whole.
Maxim
Group LLC
_________
__, 2007
Page 18 of
42
(aaa) As
used
in this Agreement, the term “knowledge
of the Company”
(or
similar language) shall mean the knowledge of the officers and directors of
the
Company who are named in the Sale Preliminary Prospectus and the Prospectus,
with the assumption that such officers and directors shall have made reasonable
and diligent inquiry of the matters presented (with reference to what is
customary and prudent for the applicable individuals in connection with the
discharge by the applicable individuals of their duties as officers or directors
of the Company).
(bbb) Any
certificate signed by or on behalf of the Company and delivered to the
Representative or to Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP, counsel for the
Representative (“Underwriters’
Counsel”),
shall
be deemed to be a representation and warranty by the Company to each Underwriter
listed on Schedule
A
hereto
as to the matters covered thereby.
2. Purchase,
Sale and Delivery of the Shares and the Representative’s
Warrants.
(a) On
the
basis of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to each Underwriter and each Underwriter, severally and not
jointly, agrees to purchase from the Company, at a purchase price per share
of
$_______, the number of Firm Shares set forth opposite their respective names
on
Schedule
A
hereto
together with any additional number of Shares which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 9 hereof.
(b) Payment
of the purchase price for, and delivery of certificates representing, the Firm
Shares shall be made at the offices of the Underwriters’ Counsel, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be agreed
upon
by the Representative and the Company, at 10:00 A.M., New York City time, on
the
third (3rd) or, as permitted under Rule 15c6-1 under the Exchange Act, fourth
(4th) business day (unless postponed in accordance with the provisions of
Section 9 hereof) following the date of the effectiveness of the Registration
Statement, or such other time not later than ten (10) business days after such
date as shall be agreed upon by the Representative and the Company as permitted
under Rule 15c6-1 under the Exchange Act (such time and date of payment and
delivery being herein called the “Closing
Date”).
The
closing of the payment of the purchase price for, and delivery of certificates
representing, the Firm Shares is referred to herein as the “Closing.”
(c) Payment
of the purchase price for the Firm Shares shall be made by wire transfer in
immediately available funds to or as directed by the Company upon delivery
of
certificates for the Firm Shares to the Representative through the facilities
of
The Depository Trust Company for the respective accounts of the several
Underwriters. Certificates for the Firm Shares shall be registered in such
name
or names and shall be in such denominations as the Representative may request
at
least two (2) business days before the Closing Date.
(d) In
addition, on the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set
forth, the Company hereby grants to the Underwriters an option to purchase
up to
an aggregate of _______ Additional Shares at the same purchase price per share
to be paid by the Underwriters for the Firm Shares as set forth in Section
2(a)
above, for the sole purpose of covering over-allotments in the sale of Firm
Shares by the Underwriters. This option may be exercised at any time and from
time to time on or before the forty-fifth (45th)
day
following the final date of the Prospectus, by written notice from the
Representative to the Company. Such notice shall set forth the aggregate number
of Additional Shares as to which the option is being exercised and the date
and
time, as reasonably determined by the Representative, when the Additional Shares
are to be delivered (any such date and time being herein sometimes referred
to
as the “Additional
Closing Date”);
provided,
however,
that no
Additional Closing Date shall occur earlier than the Closing Date or earlier
than the third (3rd) full business day after the date on which the option shall
have been exercised nor later than the eighth (8th) full business day after
the
date on which the option shall have been exercised (unless such time and date
are postponed in accordance with the provisions of Section 9 hereof). Upon
any
exercise of the option as to all or any portion of the Additional Shares, each
Underwriter, acting severally and not jointly, agrees to purchase from the
Company the number of Additional Shares that bears the same proportion of the
total number of Additional Shares then being purchased as the number of Firm
Shares set forth opposite the name of such Underwriter on Schedule
A
hereto
(or such number increased as set forth in Section 9 hereof) bears to the total
number of Firm Shares that the Underwriters have agreed to purchase hereunder,
subject, however, to such adjustments to eliminate fractional shares as the
Representative in its sole discretion shall make.
Maxim
Group LLC
_________
__, 2007
Page 19 of
42
(e) Payment
of the purchase price for, and delivery of certificates representing, the
Additional Shares shall be made at the office of Underwriters’ Counsel, or at
such other place as shall be agreed upon by the Representative and the Company,
at 10:00 A.M., New York City time, on the Additional Closing Date (unless
postponed in accordance with the provisions of Section 9 hereof), or such other
time as shall be agreed upon by the Representative and the Company.
(f) Payment
of the purchase price for the Additional Shares shall be made by wire transfer
in immediately available funds to or as directed by the Company upon delivery
of
certificates for the Additional Shares to the Representative through the
facilities of The Depository Trust Company for the respective accounts of the
several Underwriters. Certificates for the Additional Shares shall be registered
in such name or names and shall be in such denominations as the Representative
may request at least two (2) business days before the Additional Closing Date.
The Company will permit the Representative to examine and package such
certificates for delivery at least one full business day prior to the Additional
Closing Date.
(g) On
the
Closing, the Company will further issue and sell to the Representative or,
at
the direction of the Representative, to other Underwriters or selling group
members or bona fide officers of the Underwriters or selling group members,
for
an aggregate purchase price of $100, the Representative’s Warrant, which shall
entitle the holders thereof to purchase an aggregate of ________ shares of
Common Stock for a period of five years from the effective date of the
Registration Statement commencing on the six-month anniversary of the effective
date of the Registration Statement. The Representative’s Warrant shall be
exercisable at a price equal to 110% of the initial public offering price of
the
Common Stock and shall contain terms and provisions more fully described herein
below and as set forth more particularly in the Representative’s Warrant to be
executed by the Company on the Closing Date, including, but not limited to:
(i)
one demand and customary piggyback registration rights at the Company’s expense
for a period of five years after the Closing, (ii) one demand registration
right
at the Representative’s expense for a period of five years after the Closing,
(iii) cashless exercise; (iv) customary anti-dilution provisions in the event
of
stock dividends, splits, mergers, sales of all or substantially all of the
Company’s assets; and (v) prohibitions of mergers, consolidations or other
reorganizations of or by the Company or the taking by the Company of other
action during the five-year period following the effective date of the
Registration Statement unless adequate provision is made to preserve, in
substance, the rights and powers incidental to the Representative’s Warrant. The
Representative’s Warrant shall not be redeemable. As provided in the
Representative’s Warrant, the Representative may designate that the
Representative’s Warrant be issued in varying amounts directly to other
Underwriters and selling group members and to bona fide officers of the
Underwriters and selling group members. As further provided, no sale, transfer,
assignment, pledge or hypothecation of the Representative’s Warrant shall be
made for a period of 6 months from the Closing Date, except: (a) by operation
of
law or reorganization of the Company, or (b) to the Underwriters and bona fide
partners, officers of the Underwriters and selling group members.
Maxim
Group LLC
_________
__, 2007
Page 20 of
42
3. Offering.
Upon
authorization of the release of the Firm Shares or, as the case may be, the
Additional Shares, by the Representative, the Underwriters propose to offer
the
Shares for sale to the public upon the terms and conditions set forth in the
Prospectus.
4. Covenants
of the Company.
The
Company acknowledges, covenants and agrees with the Underwriters
that:
(a) The
Registration Statement and any amendments thereto have been declared effective,
and if Rule 430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b), the Company will file the Prospectus (properly completed
if
Rule 430A has been used) pursuant to Rule 424(b) within the prescribed time
period and will provide evidence satisfactory to the Representative of such
timely filing.
(b) The
Company will notify the Representative immediately (and, if requested by the
Representative, will confirm such notice in writing): (i) when the Registration
Statement and any amendments thereto become effective, (ii) of any request
by
the Commission for any amendment of or supplement to the Registration Statement,
the Sale Preliminary Prospectus or the Prospectus or for any additional
information, (iii) of the Company’s intention to file or prepare any supplement
or amendment to the Registration Statement or the Prospectus, (iv) of the
mailing or the delivery to the Commission for filing of any amendment of or
supplement to the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, including but not limited to Rule 462(b) under the Securities Act,
(v) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereto or of the initiation, or the threatening, of any proceedings therefor,
it being understood that the Company shall make every effort to avoid the
issuance of any such stop order, (vi) of the receipt of any comments from the
Commission, and (vii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose to enter a stop order at any time,
the
Company will make every reasonable effort to prevent the issuance of any such
stop order and, if issued, to obtain the lifting of such order as soon as
possible. The Company will not file any amendment to the Registration Statement
or any amendment of or supplement to the Sale Preliminary Prospectus or the
Prospectus (including the prospectus required to be filed pursuant to Rule
424(b)) that differs from the prospectus on file at the time of the
effectiveness of the Registration Statement or file any document under the
Exchange Act if such document would be deemed to be incorporated by reference
into the Prospectus to which the Representative shall object in writing after
being timely furnished in advance a copy thereof. The Company will provide
the
Representative with copies of all such amendments, filings and other documents
prior to any filing or other publication thereof and also afford the
Representative a reasonable opportunity and time to review and comment thereon.
Maxim
Group LLC
_________
__, 2007
Page
21 of
42
(c) The
Company shall comply with the Securities Act, the Exchange Act and all
applicable Rules and Regulations to permit completion of the distribution as
contemplated in this Agreement, the Registration Statement and the Prospectus.
If, at any time when a prospectus relating to the Shares is required to be
delivered under the Securities Act, the Exchange Act and all applicable Rules
and Regulations in connection with the sales of Shares, any event shall have
occurred as a result of which the Prospectus as then amended or supplemented
would, in the judgment of the Underwriters or the Company, include an untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein, in the light of
the
circumstances existing at the time of delivery to the purchaser, not misleading,
or if, to comply with the Securities Act, the Exchange Act or the Rules and
Regulations, it shall be necessary at any time to amend or supplement the
Prospectus or Registration Statement, or to file any document which is an
exhibit to the Registration Statement or the Prospectus or in any amendment
thereof or supplement thereto, the Company will notify the Representative
promptly and prepare and file with the Commission, subject to Section 4(a)
hereof, an appropriate amendment or supplement (in form and substance reasonably
satisfactory to the Representative) which will correct such statement or
omission or which will effect such compliance and will use its reasonable best
efforts to have any amendment to the Registration Statement declared effective
as soon as possible.
(d) The
Company will promptly deliver to the Underwriters and Underwriters’ Counsel a
signed copy of the Registration Statement, as initially filed and all amendments
thereto, including all consents and exhibits filed therewith, and will maintain
in the Company’s files manually signed copies of such documents for at least
five (5) years after the date of filing thereof. The Company will promptly
deliver to each of the Underwriters such number of copies of any Preliminary
Prospectus, the Sale Preliminary Prospectus, the Prospectus, the Registration
Statement, any Permitted Free Writing Prospectus (as defined below, if approved
in writing by the Representative as provided for in Section 4(cc) hereto) and
all amendments of and supplements to such documents, if any, and all documents
which are exhibits to the Registration Statement and Prospectus or any amendment
thereof or supplement thereto, as the Underwriters may reasonably request.
Prior
to 10:00 A.M., New York time, on the business day next succeeding the date
of
this Agreement and from time to time thereafter, the Company will furnish the
Underwriters with copies of the Prospectus in New York City in such quantities
as the Underwriters may reasonably request.
Maxim
Group LLC
_________
__, 2007
Page
22 of
42
(e) The
Company consents to the use and delivery of the Sale Preliminary Prospectus
by
the Underwriters in accordance with Rule 430 and Section 4(b) of the Securities
Act.
(f) If
the
Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall both file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with
Rule
111 of the Securities Act by the earlier of: (i) 10:00 p.m., New York City
time,
on the date of this Agreement, and (ii) the time that confirmations are given
or
sent, as specified by Rule 462(b)(2).
(g) During
the period of 180 days after the effective date of the Registration Statement,
neither the Company nor any of its Affiliates will directly or indirectly,
take
any action which constitutes or is designed to cause or result in, or which
could reasonably be expected to constitute, cause or result in, the
stabilization or manipulation of the price of any security to facilitate the
sale or resale of the Shares.
(h) The
Company will use its reasonable best efforts, in cooperation with the
Representative, at or prior to the time of effectiveness of the Registration
Statement, to qualify the Shares for offering and sale under the securities
laws
relating to the offering or sale of the Shares of such jurisdictions, domestic
or foreign, as the Representative may designate and to maintain such
qualification in effect for so long as required for the distribution thereof;
except that in no event shall the Company be obligated in connection therewith
to qualify as a foreign corporation or to execute a general consent to service
of process under the laws of any such state where it is not presently qualified
or where it would be subject to taxation as a foreign corporation.
(i) The
Company will make generally available to its security holders and to the
Underwriters as soon as practicable, but in any event not later than twelve
(12)
months after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Securities Act), an audited earnings statement of the
Company complying with Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule 158).
(j) During
the twelve (12) months following the Closing Date, without the consent of the
Representative which shall not be unreasonably withheld, the Company will not
file any registration statement relating to the offer or sale of any of the
Company’s securities, including any Registration Statement on Form S-8, except a
Form S-8 filed with the Commission in connection with any of the Company’s stock
option plans.
Maxim
Group LLC
_________
__, 2007
Page
23 of
42
(k) Each
of
the Company’s officers and directors and holders of Common Stock, Series A
Preferred Stock and Series B Preferred Stock (collectively, the “Lock-Up
Parties”)
shall,
prior to the Closing, enter into a written “lock-up” agreement with the
Representative in the form in
the
form attached hereto as Annex IV.
(l) During
the twelve (12) month period following the Closing Date, the Company shall
not,
without the prior written consent of the Representative, offer, sell or
distribute any of its securities, other than pursuant the Company’s 2006
Employee, Director and Consultant Plan or pursuant to the terms of any
securities exercisable or convertible into shares of the Company’s capital stock
that are outstanding at the Closing Date.
(m) During
the twelve (12) months following the Closing, offer, sell or distribute any
convertible securities convertible at a price that may, at the time of
conversion, be less than the Fair Market Value of the Common Stock on the date
of the original sale, without the consent of the Representative, which consent
shall not be unreasonably withheld. For purposes of this Section 4, the term
“Fair
Market Value”
shall
mean the greater of: (i) the average of the volume weighted average price of
the
Company’s common stock for each of the 10 trading days prior to the date of the
original sale; and (ii) the last sale price of the Common Stock, during normal
operating hours, as reported on the NCM or Nasdaq Global Market (“NGM”)
or the
American Stock Exchange, or any other exchange or electronic quotation system
on
which the Common Stock is then listed.
(n) The
Company agrees that it will, upon completion of the proposed public offering
contemplated herein, for a period of no less than three (3) years, engage a
designee of Representative as an observer (“Observer”)
to its
Board of Directors where such Observer shall attend meetings of the Board,
receive all notices and other correspondence and communications sent by the
Company to members of its Board of Directors provided, that such Observer shall
not be entitled to any compensation, other than reimbursement for all costs
incurred in attending such meetings including, food, lodging, and
transportation. The Company further agrees that, during said three (3) year
period, it shall schedule no less than four (4) formal and “in person” meetings
of its Board of Directors in each such year at which meetings such Observer
shall be permitted to attend as set forth herein; said meetings shall be held
quarterly each year and ten (10) days advance notice of such meetings shall
be
given to the Observer. Notwithstanding the foregoing, the Observer shall have
no
right to observe or participate in any meeting, and shall have no right to
receive any materials or documentations, in each case, in any circumstances
in
which the Company reasonably concludes that such participation or receipt could
result in affecting adversely a waiver of attorney-client privilege by the
Company. In lieu of the Representative’s right to designate an Observer, the
Representative shall have the right during such three-year period, in its sole
discretion, to designate one person for election as a director (“Director”)
of the
Company and the Company will utilize its best efforts to obtain the election
of
such person who shall be entitled to receive compensation equal to the
compensation of other non-employee directors, excluding for the purposes of
determining the amount of such compensation, the Chairperson of any committee
of
the Company’s Board of Directors and any such other person whose compensation
exceeds the average compensation of the remaining eligible board members by
10%.
In addition, such Director shall also be entitled to receive the same expense
reimbursements and other benefits as any other non-employee director. The
Representative agrees that any such person that they designate for election
as a
Director hereunder, will be “independent” as that term is defined by the by-laws
of the: (i) the NGM if the Company’ securities are listed on the NGM or (ii) the
NCM if the Company’ securities are listed on the NCM. In the event that the
Company’s securities are not listed on the NGM or the NCM at the time of such
designation, any such Director will meet the independence requirements of
Sarb-Ox. The Company shall indemnify and hold such Observer or Director harmless
against any and all claims, actions, damages, costs and expenses, and judgments
arising solely out of the attendance and participation of such Observer or
Director at any such meeting described herein.
Maxim
Group LLC
_________
__, 2007
Page
24
of
42
(o) The
Company agrees that it will, upon completion of the proposed public offering
contemplated herein, for a period of no less than three (3) years, maintain
a
liability insurance policy affording coverage for the acts of its officers
and
directors, and it agrees, if possible, to include such Observer or Director
as
an insured under such policy.
(p) For
a
period of two (2) years from the Closing, the Company, at its expense, shall
provide the Representative a subscription to the Company’s weekly Depository
Transfer Company Security Position Reports.
(q) For
a
period of three (3) years from the effective date of the Registration Statement,
the Company, at its expense, shall obtain
and keep current a listing in the Standard & Poors or Mergent Manual or
similar listing which qualifies the Company for resale exemptions;
(r) During
the period of three (3) years from the effective date of the Registration
Statement, the Company will furnish or make available via ▇▇▇▇▇ to the
Underwriters copies of all reports or other communications (financial or other)
furnished to security holders or from time to time published or publicly
disseminated by the Company, and will deliver to the Underwriters: (i) as soon
as they are available, copies of any reports, financial statements and proxy
or
information statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is listed;
and (ii) such additional information concerning the business and financial
condition of the Company as the Representative may from time to time reasonably
request.
(s) The
Company will not issue press releases or engage in any other publicity, without
the Representative’s prior written consent (which consent shall not unreasonably
be withheld, conditioned or delayed), for a period ending at 5:00 p.m. Eastern
time on the first business day following the fortieth (40th) day following
the
Closing Date.
(t) The
Company will use its good faith best efforts to maintain its key person life
insurance with a insurer rated at least AA or better in the most recent addition
of “Best’s Life Reports” in the amount of $1,500,000 on the life of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ in full force and effect for a period of three (3) years from the
Closing Date. The Company shall be the sole beneficiary of such
policy.
Maxim
Group LLC
_________
__, 2007
Page
25 of
42
(u) Upon
conclusion of the Offering, the Company will engage (for no less than two (2)
years from the Closing Date) a financial public relations firm mutually
acceptable to the Company and the Representative.
(v) The
Company has or will retain a transfer agent reasonably acceptable to the
Representative for the Shares and shall continue to retain such transfer agent
(or another transfer agent reasonably acceptable to the Representatives) for
a
period of three (3) years following the Closing Date.
(w) The
Company will apply the net proceeds from the sale of the Shares as set forth
under the caption “Use of Proceeds” in the Prospectus. Without
the written consent of the Representative, no proceeds of the Offering will
be
used to pay outstanding loans from officers, directors or shareholders or to
pay
any accrued salaries or bonuses to any employees or former employees, except
as
disclosed in the Prospectus.
(x) The
Company will use its reasonable best efforts to effect and maintain the listing
of the Shares on the NCM.
(y) The
Company, during the period when the Prospectus is required to be delivered
under
the Securities Act or the Exchange Act, will use its best efforts to file all
documents required to be filed with the Commission pursuant to the Securities
Act, the Exchange Act and the Rules and Regulations within the time periods
required thereby.
(z) The
Company will do and perform all things required to be done or performed under
this Agreement by the Company prior to the Closing Date or the Additional
Closing Date, as the case may be, and satisfy all conditions precedent to the
delivery of the Firm Shares and the Additional Shares.
(aa) The
Company will not take, and will cause its Affiliates not to take, directly
or
indirectly, any action which constitutes or is designed to cause or result
in,
or which could reasonably be expected to constitute, cause or result in, the
stabilization or manipulation of the price of any security to facilitate the
sale or resale of the Shares or any other shares of Common Stock.
(bb) The
Company shall cause to be prepared and delivered to the Representative, at
its
expense, within one (1) business day from the effective date of this Agreement,
an Electronic Prospectus
to be used by the Underwriters in connection with the Offering. As used herein,
the term “Electronic
Prospectus”
means
a
form of prospectus, and any amendment or supplement thereto, that meets each
of
the following conditions: (i) it shall be encoded in an electronic format,
reasonably satisfactory to the Representative, that may be transmitted
electronically by the other Underwriters to offerees and purchasers of the
Shares for at least the period during which a Prospectus relating to the Shares
is required to be delivered under the Securities Act; (ii) it shall disclose
the
same information as the paper prospectus and prospectus filed pursuant to ▇▇▇▇▇,
except to the extent that graphic and image material cannot be disseminated
electronically, in which case such graphic and image material shall be replaced
in the electronic prospectus with a fair and accurate narrative description
or
tabular representation of such material, as appropriate; and (iii) it shall
be
in or convertible into a paper format or an electronic format, reasonably
satisfactory to the Representative, that will allow recipients thereof to store
and have continuously ready access to the prospectus at any future time, without
charge to such recipients (other than any fee charged for subscription to the
Internet as a whole and for on-line time). The Company hereby confirms that
it
has included or will include in the Prospectus filed pursuant to ▇▇▇▇▇ or
otherwise with the Commission and in the Registration Statement at the time
it
was declared effective an undertaking that, upon receipt
of a request by an investor or his or her representative within the period
when
a prospectus relating to the Shares is required to be delivered under the
Securities Act, the Company shall transmit or cause to be transmitted promptly,
without charge, a paper copy of the Prospectus.
Maxim
Group LLC
_________
__, 2007
Page
26 of
42
(cc) The
Company represents and agrees that it has not made and will not, unless it
obtains the prior written consent of the Representative, make any offer relating
to the Shares that would constitute an “issuer free writing prospectus,” as
defined in Rule 433 promulgated under the Securities Act, or that would
otherwise constitute a “free writing prospectus,” as defined in Rule 405
promulgated under the Securities Act, required to be filed with the Commission.
Any such free writing prospectus consented to by the Representative is
hereinafter referred to as a “Permitted
Free Writing Prospectus.”
The
Company represents that it has treated or agrees that it will treat each
Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as
defined in Rule 433 promulgated under the Securities Act, and has complied
and will comply with the requirements said Rule 433 applicable to any
Permitted Free Writing Prospectus, including timely filing with the Commission
where required, legending and record keeping.
5. Consideration;
Payment of Expenses; Right of First Refusal.
(a) In
addition to selling the Shares to the Underwriters at the price per Share set
forth in Section 2(a) hereof, in consideration of the services to be provided
for hereunder, the Company shall pay to the Representative or its respective
designees a
non-accountable expense allowance equal to two percent (2.0%) of the gross
proceeds of the Offering (exclusive of proceeds from the sale of Additional
Shares), less $50,000 previously paid.
(b) The
Representative reserves the right to reduce any item of its compensation or
adjust the terms thereof as specified herein in the event that a determination
shall be made by the NASD to the effect that the Underwriters’ aggregate
compensation is in excess of NASD rules or that the terms thereof require
adjustment.
Maxim
Group LLC
_________
__, 2007
Page
27 of
42
(c) Whether
or not the transactions contemplated by this Agreement, the Registration
Statement and the Prospectus are consummated or this Agreement is terminated,
the Company hereby agrees to pay all costs and expenses incident to the
performance of its obligations hereunder, including the following:
(i) all
expenses in connection with the preparation, printing, “edgarization” and filing
of the Registration Statement, any Preliminary Prospectus and the Prospectus
and
any and all amendments and supplements thereto and the mailing and delivering
of
copies thereof to the Underwriters and dealers;
(ii) the
fees,
disbursements and expenses of the Company’s counsel and accountants in
connection with the registration of the Shares and the Representative Warrant
Shares under the Securities Act and the Offering;
(iii) the
cost
of producing this Agreement and any agreement among Underwriters, blue sky
survey, closing documents and other instruments, agreements or documents
(including any compilations thereof) in connection with the Offering, and,
upon
Closing, the cost of eight (8) bound volumes of such documents for the
Representative and the cost of eight (8) lucite deal cubes;
(iv) upon
Closing, the cost of two (2) “tombstone” advertisements
to be
placed in appropriate daily or weekly periodicals of
the
Representative’s choice (i.e., The Wall Street Journal and The New York Times)
up to $25,000;
(v) all
expenses in connection with the qualification of the Shares and the
Representative Warrant Shares for offering and sale under state or foreign
securities or blue sky laws, including the fees and disbursements of the
Underwriters’ counsel in connection with such qualification and in connection
with any blue sky survey undertaken by such counsel;
(vi) the
filing fees incident to securing any required review by the NASD of the terms
of
the Offering;
(vii) all
fees
and expenses in connection with listing the Shares on the NCM;
(viii) all
expenses incurred by the Company in connection with attending or hosting
meetings with prospective purchasers of the Shares (“Road
Show Expenses”);
(ix) any
stock
transfer taxes incurred in connection with the transfer of securities from
the
Company to the Underwriters pursuant to this Agreement or the
Offering;
(x) the
cost
of preparing stock certificates representing the Shares;
Maxim
Group LLC
_________
__, 2007
Page
28 of
42
(xi) the
cost
and charges of any transfer agent or registrar for the Shares;
and
(xii) all
other
costs and expenses incident to the performance of the Company obligations
hereunder which are not otherwise specifically provided for in this Section
5.
Notwithstanding
anything to the contrary in this Section 5, any expenses (other than the legal
expenses of Underwriters’ counsel) in excess of $3,000 shall be subject to the
prior approval by the Company, which approval shall not be unreasonably withheld
or delayed.
(d) At
the
Closing,
the
Company shall issue a payment of $30,000 to Underwriters’
Counsel in consideration of “Blue Sky” services rendered.
The
Company shall also
pay,
as due, state registration, qualification and filing fees, NASD filing fees
and
accountable out-of-pocket disbursements in connection with such registration,
qualification or filing.
(e) The
Company shall also reimburse the Underwriter for all fees, expenses and
disbursements relating to background checks of the Company’s officers and
directors in an amount not to exceed $3,000 per individual; provided, that
the
Company shall only be responsible for the fees, expenses and disbursements
for
the background checks for up to three (3) individuals, however, in the event
that the Company has more than three (3) senior executive officers prior to
the
completion of the initial public offering, the Company will pay up to $3,000
for
the expenses and disbursements for the background checks for each such
additional senior executive officer.
(f) It
is
understood, however, that except as provided in this Section, and Sections
6, 7
and 10 hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel. Notwithstanding anything to the contrary
in
this Section 5, in the event that this Agreement is terminated pursuant to
Section 5 or 10(b) hereof, or subsequent to a Material Adverse Change, the
Company will pay all out of pocket accountable expenses of the Underwriters
(including but not limited to the reasonable fees and disbursements of counsel
to the Underwriters, up to $50,000) incurred in connection herewith, less any
amounts previously advanced to the Representative.
(g) For
a
period of eighteen (18) months from the closing of the Offering, the Company
grants the Representative the right of first refusal to act as lead underwriter
or minimally as a co-manager with at least 50% of the economics; or, in the
case
of a three-handed deal 33% of the economics, for any and all future public
and
private equity and debt offerings by the Company or any successor to or any
subsidiary of the Company.
(h) For
a
period of eighteen (18) months from the effective date of the Registration
Statement, if the Company proposes to be acquired by another entity, the Company
shall first retain the Representative as its financial advisor and/or its
investment banker in connection with such acquisition for the following
fee:
(i) The
greater of $500,000 or 1% of the aggregate value of the sale if the aggregate
sale value is equal to or less than $50,000,000;
Maxim
Group LLC
_________
__, 2007
Page
29 of
42
(ii) If
the
aggregate sale value is between $50,000,000 and $75,000,000, then the success
fee will consist of the fees earned under (h)(i) above plus 0.75% of the amount
between $50,000,000 and $75,000,000;
(iii) If
the
aggregate sale exceeds $75,000,000, then the success fee will consist of the
fees earned under (h)(ii) above plus 0.5% of the amount in excess of
$75,000,000.
6. Conditions
of Underwriters’ Obligations.
The
obligations of the Underwriters to purchase and pay for the Firm Shares and
the
Additional Shares as provided herein shall be subject to: (i) the accuracy
of
the representations and warranties of the Company herein contained in all
material respects, as of the date hereof and as of the Closing Date, (ii) the
absence from any certificates, opinions, written statements or letters furnished
to the Representative or to Underwriters’ Counsel pursuant to this Section 6 of
any material misstatement or omission, (iii) the performance in all material
respects by the Company of its obligations hereunder, and (iv) each of the
following additional conditions. For purposes of this Section 6, the terms
“Closing Date” and “Closing” shall refer to the Closing Date for the Firm Shares
and any Additional Closing Date, if different, for the Additional Shares, and
each of the foregoing and following conditions must be satisfied as of each
Closing.
(a) The
Registration Statement shall have become effective and all necessary regulatory
or listing approvals shall have been received not later than 5:30 P.M., New
York
time, on the date of this Agreement, or at such later time and date as shall
have been consented to in writing by the Representative. If the Company shall
have elected to rely upon Rule 430A under the Securities Act, the Prospectus
shall have been filed with the Commission in a timely fashion in accordance
with
the terms hereof and a form of the Prospectus containing information relating
to
the description of the Shares and the method of distribution and similar matters
shall have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period; and, at or prior to the Closing Date or the actual
time
of the Closing, no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued and
no
proceedings therefor shall have been initiated or threatened by the Commission.
(b) The
Representative shall have received the favorable written opinion of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., legal counsel for the Company,
dated as of the Closing Date addressed to the Underwriters in the form attached
hereto as Annex
I.
Maxim
Group LLC
_________
__, 2007
Page 30 of
42
(c) The
Representative shall have received the favorable written opinion of
________________, special FDA regulatory counsel for the Company, dated as
of
the Closing Date addressed to the Underwriters in the form attached hereto
as
Annex
II.
(d) The
Representative shall have received the favorable written opinion of ▇▇▇▇▇▇
&
▇▇▇▇▇▇ LLP, special intellectual property counsel for the Company, dated as
of
the Closing Date addressed to the Underwriters in the form attached hereto
as
Annex
III.
(e) All
proceedings taken in connection with the sale of the Firm Shares and the
Additional Shares as herein contemplated shall be satisfactory in form and
substance to the Representative and to Underwriters’ Counsel.
(f) The
Representative shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company, dated as of the Closing Date to
the
effect that: (i) the condition set forth in subsection (a) of this Section
6 has
been satisfied, (ii) as of the date hereof and as of the applicable Closing
Date, the representations and warranties of the Company set forth in Section
1
hereof are accurate in all material respects, (iii) as of the applicable Closing
Date, all agreements, conditions and obligations of the Company to be performed
or complied with hereunder on or prior thereto have been duly performed or
complied with in all material respects, (iv) the Company has not sustained
any
material loss or interference with their respective businesses, whether or
not
covered by insurance, or from any labor dispute or any legal or governmental
proceeding, (v) no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof has been issued and no
proceedings therefor have been initiated or threatened by the Commission, (vi)
there are no pro forma or as adjusted financial statements that are required
to
be included or incorporated by reference in the Registration Statement and
the
Prospectus pursuant to the Rules and Regulations which are not so included
or
incorporated by reference and (vii) subsequent to the respective dates as of
which information is given in the Registration Statement and the Prospectus
there has not been any material adverse change or any development involving
a
prospective material adverse change, whether or not arising from transactions
in
the ordinary course of business, in or affecting: (x) the business, condition
(financial or otherwise), results of operations, shareholders’ equity,
properties or prospects (as such prospects are disclosed or described in any
Preliminary Prospectus or the Prospectus) of the Company; (y) the long-term
debt
or capital stock of the Company; or (z) the Offering or consummation of any
of
the other transactions contemplated by this Agreement, the Registration
Statement and the Prospectus.
(g) On
the
date of this Agreement, on the Closing Date and, as the case may be, on each
Additional Closing Date, the Representative shall have received a “cold comfort”
letter from SLGG
dated,
respectively, as of the date of the date of delivery and addressed to the
Underwriters and in form and substance satisfactory to the Representative and
Underwriters’ Counsel,
confirming that they are independent certified public accountants with respect
to the Company within the meaning of the Securities Act and the Rules and
Regulations, and stating, as of the date of delivery (or, with respect to
matters involving changes or developments since the respective dates as of
which
specified financial information is given in the Prospectus,
as of a date not more than five (5) days prior to the date of such letter),
the
conclusions and findings of such firm with respect to the financial information
and other matters relating to the Registration Statement covered by such letter
and, with respect to letters issued as of Additional Closing Dates, confirming
the conclusions and findings set forth in such prior letter.
Maxim
Group LLC
_________
__, 2007
Page 31 of
42
(h) Subsequent
to the execution and delivery of this Agreement or, if earlier, the dates as
of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been any material change in the capital stock or long-term
debt of the Company or any change or development involving a change, whether
or
not arising from transactions in the ordinary course of business, in the
business, condition (financial or otherwise), results of operations,
shareholders’ equity, properties or prospects (as such prospects are disclosed
or described in any Preliminary Prospectus or the Prospectus) of the Company,
including but not limited to the occurrence of any fire, flood, storm,
explosion, accident, act of war or terrorism or other calamity, the effect
of
which, in any such case described above, is, in the sole judgment of the
Representative, so material and adverse as to make it impracticable or
inadvisable to proceed with the Offering on the terms and in the manner
contemplated in the Prospectus (exclusive of any supplement).
(i) The
Representative shall have received lock-up agreements from each Lock-Up Party,
duly executed by the applicable Lock-Up Party, in the form attached hereto
as
Annex
IV.
(j) The
Shares shall have been approved for listing on the NCM.
(k) The
NASD
shall have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(l) No
action
shall have been taken and no statute, rule, regulation or order shall have
been
enacted, adopted or issued by any federal, state or foreign governmental or
regulatory authority that would, as of the Closing Date, prevent the issuance
or
sale of the Shares; and no injunction or order of any federal, state or foreign
court shall have been issued that would, as of the Closing Date, prevent the
issuance or sale of the Shares.
(m) The
Company shall have obtained a key person life insurance policy with an insurer
rated at least AA or better in the most recent edition of “Best Life Reports” in
the amount of at least $1,500,000 on the life of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and the
Company shall have provided written evidence of such assignment to the
Representative.
(n) The
Company shall have furnished the Underwriters and Underwriters’ Counsel with
such other certificates, opinions or other documents as they may have reasonably
requested.
Maxim
Group LLC
_________
__, 2007
Page 32 of
42
If
any of
the conditions specified in this Section 6 shall not have been fulfilled when
and as required by this Agreement, or if any of the certificates, opinions,
written statements or letters furnished to the Representative or to
Underwriters’ Counsel pursuant to this Section 6 shall not be reasonably
satisfactory in form and substance to the Representative and to Underwriters’
Counsel, all obligations of the Underwriters hereunder may be cancelled by
the
Representative at, or at any time prior to, the consummation of the Closing,
and
the obligations of the Underwriters to purchase the Additional Shares may be
cancelled by the Representative at, or at any time prior to, the Additional
Closing Date. Notice of such cancellation shall be given to the Company in
writing, or by telephone. Any such telephone notice shall be confirmed promptly
thereafter in writing.
7. Indemnification.
(a) The
Company shall indemnify and hold harmless each Underwriter and each Person,
if
any, who controls each Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including,
but
not limited to, reasonable attorneys’ fees and any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they
or
any of them may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses
(or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact made by the Company contained
in
the Registration Statement, as originally filed or any amendment thereof, or
any
related Preliminary Prospectus (including the Sale Preliminary Prospectus)
or
the Prospectus (in light of the circumstances in which such statement was made),
or in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission made by such party to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided,
however,
that the
Company will not be liable in any such case to the extent but only to the extent
that (i) any such loss, liability, claim, damage or expense arises out of or
is
based upon any such untrue statement or alleged untrue statement or omission
or
alleged omission made therein in reliance upon and in conformity with the
Underwriters’ Information or (ii) such statement or omission was corrected in
the Prospectus in conformity with the requirements of the Securities Act. This
indemnity agreement will be in addition to any liability, which the Company
may
otherwise have, including but not limited to other liability under this
Agreement. Notwithstanding the foregoing, the foregoing indemnity shall not
inure to the benefit of any Underwriter (or any person controlling such
Underwriter) from whom the person asserting any such losses, claims, damages
or
liabilities purchased Shares, if either a copy of a Permitted Free Writing
Prospectus (previously approved in writing by the Representative as provided
for
in Section 4(cc) hereof) intended for general distribution to prospective
investors or the Prospectus (in each case, as then amended or supplemented
if
the Company shall have furnished any amendments or supplements thereto) was
not
sent or given by or on behalf of such Underwriter to such person, if required
by
law to have been delivered, at or prior to the written confirmation of the
sale
of the Shares to such person, and if such Permitted Free Writing Prospectus
intended for general distribution to prospective investors or Prospectus, as
applicable, would have cured the defect giving rise to such losses, claims,
damages or liabilities, unless such failure is the result of noncompliance
by
the Company with Section 4(d) hereof.
Maxim
Group LLC
_________
__, 2007
Page 33 of
42
(b) Each
Underwriter, severally and not jointly, shall indemnify and hold harmless the
Company, each of the directors of the Company, each of the officers of the
Company who shall have signed the Registration Statement, and each other Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including
but
not limited to attorneys’ fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them
may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, as
originally filed or any amendment thereof, or any related Preliminary Prospectus
(including the Sale Preliminary Prospectus) or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
in
each case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with the Underwriters’ Information;
provided,
however,
that in
no case shall any Underwriter be liable or responsible for any amount in excess
of the underwriting discount applicable to the Shares to be purchased by such
Underwriter hereunder.
(c) Promptly
after receipt by an indemnified party under subsection (a) or (b) above of
notice of any claims or the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification
is
to be sought in writing of the claim or the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve the indemnifying
party from any liability which it may have under this Section 7 to the extent
that it is not materially prejudiced as a result thereof and in any event shall
not relieve it from any liability that such indemnifying party may have
otherwise than on account of the indemnity agreement hereunder). In case any
such claim or action is brought against any indemnified party, and it notifies
an indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate, at its own expense in the defense of such action,
and to the extent it may elect 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, that counsel to the indemnifying party shall not
(except with the written consent of the indemnified party) also be counsel
to
the indemnified party. Notwithstanding the foregoing, the indemnified party
or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of
such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, (iii) the
indemnifying party does not diligently defend the action after assumption of
the
defense, or (iv) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct
the
defense of such action on behalf of the indemnified party or parties), in any
of
which events such fees and expenses shall be borne by the indemnifying parties.
No indemnifying party shall, without the prior written consent of the
indemnified parties, effect any settlement or compromise of, or consent to
the
entry of judgment with respect to, any pending or threatened claim,
investigation, action or proceeding in respect of which indemnity or
contribution may be or could have been sought by an indemnified party under
this
Section 7 or Section 8 hereof (whether or not the indemnified party is an actual
or potential party thereto), unless (x) such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such claim, investigation, action or proceeding and
(ii) does not include a statement as to or an admission of fault, culpability
or
any failure to act, by or on behalf of the indemnified party, and (y) the
indemnifying party confirms in writing its indemnification obligations hereunder
with respect to such settlement, compromise or judgment.
Maxim
Group LLC
_________
__, 2007
Page 34 of
42
8. Contribution.
In
order to provide for contribution in circumstances in which the indemnification
provided for in Section 7 hereof is for any reason held to be unavailable from
any indemnifying party or is insufficient to hold harmless a party indemnified
thereunder, the Company
and the
Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company, any
contribution received by the Company from Persons, other than the Underwriters,
who may also be liable for contribution, including Persons who control the
Company within the meaning of Section 15 of the Securities Act or Section 20
of
the Exchange Act, officers of the Company who signed the Registration Statement
and directors of the Company) as incurred to which the Company and one or more
of the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company
and the
Underwriters from the Offering or, if such allocation is not permitted by
applicable law, in such proportions as are appropriate to reflect not only
the
relative benefits referred to above but also the relative fault of the
Company and
the
Underwriters in connection with the statements or omissions 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
and the
Underwriters shall be deemed to be in the same proportion as: (x) the total
proceeds from the Offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company bears
to
(y) the underwriting discount or commissions received by the Underwriters,
in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault of each of the Company
and of
the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company
or the
Underwriters and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Company
and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 8 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 above in this Section. The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an indemnified party and referred
to
above in this Section 8 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
judicial, regulatory or other legal or governmental agency or body, commenced
or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 8: (i) no Underwriter shall be required to contribute any amount
in
excess of the amount by which the discounts and commissions applicable to the
Shares underwritten by it and distributed to the public exceeds the amount
of
any damages which such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission
and
(ii) no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any
Person who was not guilty of such fraudulent misrepresentation. For purposes
of
this Section 8, each Person, if any, who controls an Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as such Underwriter, and each Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject
in
each case to clauses (i) and (ii) of the immediately preceding sentence. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect
of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they
may
have under this Section 8 or otherwise. The obligations of the Underwriters
to
contribute pursuant to this Section 8 are several in proportion to the
respective number of Shares to be purchased by each of the Underwriters
hereunder and not joint.
Maxim
Group LLC
_________
__, 2007
Page 35 of
42
9. Underwriter
Default.
(a) If
any
Underwriter or Underwriters shall default in its or their obligation to purchase
Firm Shares or Additional Shares hereunder, and if the Firm Shares or Additional
Shares with respect to which such default relates (the “Default
Shares”)
do not
(after giving effect to arrangements, if any, made by the Representative
pursuant to subsection (b) below) exceed in the aggregate 10% of the number
of
Firm Shares or Additional Shares, each non-defaulting Underwriter, acting
severally and not jointly, agrees to purchase from the Company that number
of
Default Shares that bears the same proportion of the total number of Default
Shares then being purchased as the number of Firm Shares set forth opposite
the
name of such Underwriter on Schedule
A
hereto
bears to the aggregate number of Firm Shares set forth opposite the names of
the
non-defaulting Underwriters, subject, however, to such adjustments to eliminate
fractional shares as the Representative in its sole discretion shall make.
Maxim
Group LLC
_________
__, 2007
Page 36 of
42
(b) In
the
event that the aggregate number of Default Shares exceeds 10% of the number
of
Firm Shares or Additional Shares, as the case may be, the Representative may
in
their discretion arrange for itself or for another party or parties (including
any non-defaulting Underwriter or Underwriters who so agree) to purchase the
Default Shares on the terms contained herein. In the event that within five
calendar days after such a default the Representative do not arrange for the
purchase of the Default Shares as provided in this Section 9, this Agreement
or,
in the case of a default with respect to the Additional Shares, the obligations
of the Underwriters to purchase and of the Company to sell the Additional Shares
shall thereupon terminate, without liability on the part of the Company with
respect thereto or the Underwriters (except in each case as provided in Sections
5, 7, 8, 10 and 11(d)), but nothing in this Agreement shall relieve a defaulting
Underwriter or Underwriters of its or their liability, if any, to the other
Underwriters and the Company for damages occasioned by its or their default
hereunder.
(c) In
the
event that any Default Shares are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
the Representative or the Company shall have the right to postpone the Closing
Date or Additional Closing Date, as the case may be for a period, not exceeding
five (5) business days, in order to effect whatever changes may thereby be
made
necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment or supplement to the Registration Statement or the Prospectus which,
in the reasonable opinion of Underwriters’ Counsel, may thereby be made
necessary or advisable. The term “Underwriter” as used in this Agreement shall
include any party substituted under this Section 9 with like effect as if it
had
originally been a party to this Agreement with respect
to such Firm Shares and Additional Shares.
10. Survival
of Representations and Agreements.
All
representations and warranties, covenants and agreements of the Company and
the
Underwriters contained in this Agreement or in certificates of officers of
the
Company submitted pursuant hereto, including the agreements contained in Section
5, the indemnity agreements contained in Section 7 and the contribution
agreements contained in Section 8 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling Person thereof or by or on behalf of the Company,
any of its officers and directors or any controlling Person thereof, and shall
survive delivery of and payment for the Shares to and by the Underwriters.
The
covenants and agreements contained in Sections 5, 7, 8, this Section 10 and
Sections 14 and 15 hereof shall survive any termination of this Agreement,
including termination pursuant to Section 9 or 11 hereof.
Maxim
Group LLC
_________
__, 2007
Page 37 of
42
11. Effective
Date of Agreement; Termination.
(a) This
Agreement shall become effective upon the later of: (i) receipt by the
Representative and the Company of notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement.
(b) The
Representative shall have the right to terminate this Agreement at any time
prior to the consummation
of the Closing
or
to
terminate the obligations of the Underwriters to purchase the Additional Shares
at any time prior to the
consummation of any closing to occur on an Additional
Closing Date, as the case may be, if:
(i)
any
domestic or international event or act or occurrence has materially disrupted,
or in the opinion of the Representative will in the immediate future materially
disrupt, the market for the Company’s securities or securities in general; or
(ii)
trading
on the New York Stock Exchange, the NGM, the NCM or the American Stock Exchange
shall
have been suspended or been made subject to material limitations, or minimum
or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required, on the New York Stock Exchange,
the
NGM,
the NCM or
the
American
Stock Exchange
or by
order of the Commission or any other governmental authority having jurisdiction;
or
(iii)
a
banking
moratorium has been declared by any state or federal authority or if any
material disruption in commercial banking or securities settlement or clearance
services shall have occurred; or
(iv)
(A)
there shall have occurred any outbreak or escalation of hostilities or acts
of
terrorism involving the United States or there is a declaration of a national
emergency or war by the United States or (B) there shall have been any other
calamity or crisis or any change in political, financial or economic conditions,
or (C) since the respective dates as of which information is given in Sale
Preliminary Prospectus and the Prospectus (or any Permitted Free Writing
Prospectus, if any), the Representative becomes aware of: (1) any change or
previously undisclosed matter effecting a material change in the capital stock
or debt of the Company or (2) any material change, any development involving
a
prospective material change, or any previously undisclosed matter effecting
a
material or prospective material change in or affecting the general affairs,
management, financial position, stockholders’ equity or results of operations of
the Company, other than as set forth or contemplated in Sale Preliminary
Prospectus and the Prospectus, if the effect of any such event set forth in
this
Section 11(b)(iv)(A), (B) or (C), in the sole judgment of the Representative,
makes it impracticable or inadvisable to proceed with the offering, sale and
delivery of the Firm Shares or the Additional Shares, as the case may be, on
the
terms and in the manner contemplated by this Agreement and the
Prospectus.
Maxim
Group LLC
_________
__, 2007
Page 38 of
42
(c) Any
notice of termination pursuant to this Section 11 shall be in
writing.
(d) If
this
Agreement shall be terminated pursuant to any of the provisions hereof (other
than pursuant to Section 9(b) hereof), or if the sale of the Shares provided
for
herein is not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, the Company will, subject to demand by
the
Representative, reimburse the Underwriters for all out-of-pocket expenses
(including the reasonable fees and expenses of their counsel), incurred by
the
Underwriters in connection herewith.
12. Notices.
All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing, and:
(a) if
sent
to the Representative or any Underwriter, shall be mailed, delivered, or faxed
and confirmed in writing, to Maxim Group LLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Director of Investment Banking, in each
case, with a copy to Underwriters’ Counsel at Ellenoff ▇▇▇▇▇▇▇▇ & Schole
LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.;
and
(b) if
sent
to the Company shall be mailed, delivered, or faxed and confirmed in writing
to
the Company and its counsel at the addresses set forth in the Registration
Statement, with a copy to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
The Chrysler Center, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇
▇▇▇▇▇▇▇, Esq.;
provided,
however,
that any
notice to an Underwriter pursuant to Section 7 shall be delivered or sent by
mail or facsimile transmission to such Underwriter at its address set forth
in
its acceptance facsimile to the Representative, which address will be supplied
to any other party hereto by the Representative upon request. Any such notices
and other communications shall take effect at the time of receipt thereof.
13. Parties.
This
Agreement shall inure solely to the benefit of, and shall be binding upon,
the
Underwriters, the Company and the controlling Persons, directors, officers,
employees and agents referred to in Sections 6 and 7 hereof, and their
respective successors and assigns, and no other Person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be
for
the sole and exclusive benefit of the parties hereto and said controlling
Persons and their respective successors, officers, directors, heirs and legal
representatives, and it is not for the benefit of any other Person. The term
“successors and assigns” shall not include a purchaser, in its capacity as such,
of Shares from any of the Underwriters.
Maxim
Group LLC
_________
__, 2007
Page 39 of
42
14. Governing
Law.
This
Agreement shall be deemed to have been executed and delivered in New York and
both this Agreement and the transactions contemplated hereby shall be governed
as to validity, interpretation, construction, effect, and in all other respects
by the laws of the State of New York, without regard to the conflicts of laws
principals thereof (other than Section 5-1401 of The New York General
Obligations Law). Each of the Underwriters and the Company: (a) agrees that
any
legal suit, action or proceeding arising out of or relating to this Agreement
and/or the transactions contemplated hereby shall be instituted exclusively
in
the Supreme Court of the State of New York, New York County, or in the United
States District Court for the Southern District of New York, (b) waives any
objection which it may have or hereafter to the venue of any such suit, action
or proceeding, and (c) irrevocably consents to the jurisdiction of Supreme
Court
of the State of New York, New York County, or in the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. Each of the Underwriters and the Company further agrees to accept
and acknowledge service of any and all process which may be served in any such
suit, action or proceeding in the Supreme Court of the State of New York, New
York County, or in the United States District Court for the Southern District
of
New York and agrees that service of process upon the Company mailed by certified
mail to the Company’s address or delivered by Federal Express via overnight
delivery shall be deemed in every respect effective service of process upon
the
Company, in any such suit, action or proceeding, and service of process upon
the
Underwriters mailed by certified mail to the Underwriters’ address or delivered
by Federal Express via overnight delivery shall be deemed in every respect
effective service process upon the Underwriter, in any such suit, action or
proceeding. THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT
PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS)
HEREBY WAIVES ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
CLAIM
BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION STATEMENT, THE
SALE PRELIMINARY PROSPECTUS AND THE PROSPECTUS.
15. Entire
Agreement.
This
Agreement, together with the schedule and exhibits attached hereto and as the
same may be amended from time to time in accordance with the terms hereof,
contains the entire agreement among the parties hereto relating to the subject
matter hereof and there are no other or further agreements outstanding not
specifically mentioned herein.
16. Severability.
If any
term or provision of this Agreement or the performance thereof shall be invalid
or unenforceable to any extent, such invalidity or unenforceability shall not
affect or render invalid or unenforceable any other provision of this Agreement
and this Agreement shall be valid and enforced to the fullest extent permitted
by law.
17. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument. Delivery of a signed counterpart of this Agreement
by facsimile transmission shall constitute valid and sufficient delivery
thereof.
Maxim
Group LLC
_________
__, 2007
Page 40 of
42
18. Headings.
The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
19. Time
is of the Essence.
Time
shall be of the essence of this Agreement. As used herein, the term “business
day” shall mean any day when the Commission’s office in Washington, D.C. is open
for business.
20. No
Fiduciary Relationship.
The
Company hereby acknowledges that the Underwriters are acting solely as
underwriters in connection with the offering of the Company’s securities. The
Company further acknowledges that the Underwriters are acting pursuant to a
contractual relationship created solely by this Agreement entered into on an
arm’s length basis and in no event do the parties intend that the Underwriters
act or be responsible as a fiduciary to the Company, its management,
stockholders, creditors or any other person in connection with any activity
that
the Underwriters may undertake or have undertaken in furtherance of the offering
of the Company’s securities, either before or after the date hereof. The
Underwriters hereby expressly disclaim any fiduciary or similar obligations
to
the Company, either in connection with the transactions contemplated by this
Agreement or any matters leading up to such transactions, and the Company hereby
confirms its understanding and agreement to that effect. The Company and the
Underwriters agree that they are each responsible for making their own
independent judgments with respect to any such transactions, and that any
opinions or views expressed by the Underwriters to the Company regarding such
transactions, including but not limited to any opinions or views with respect
to
the price or market for the Company’s securities, do not constitute advice or
recommendations to the Company. The Company hereby waives and releases, to
the
fullest extent permitted by law, any claims that the Company may have against
the Underwriters with respect to any breach or alleged breach of any fiduciary
or similar duty to the Company in connection with the transactions contemplated
by this Agreement or any matters leading up to such
transactions.
[Signature
Page Follows]
Maxim
Group LLC
_________
__, 2007
Page 41 of
42
If
the
foregoing correctly sets forth your understanding, please so indicate in
the
space provided below for that purpose, whereupon this letter shall constitute
a
binding agreement among us.
| Very truly yours, | ||
| RESPONSE GENETICS, INC. | ||
| |
|
|
| By: | ||
|
Name:
Title
|
||
Accepted
by the Representative, acting for itself and as
Representative
of the Underwriters named on Schedule
A
attached hereto,
as
of the date first written above:
MAXIM
GROUP LLC
By:
Name:
Title:
[Signature
Page to Underwriting Agreement]
SCHEDULE
A
Underwriters
|
Underwriter
|
Total
Number of Firm Shares to be Purchased
|
Number
of Additional Shares to be
Purchased
if Option is Fully Exercised
|
||
|
Maxim
Group LLC
|
||||
|
▇▇▇▇▇
& Company
|
||||
|
TOTAL
|
ANNEX
IV
Form
of Lock-Up Agreement for Lock-Up Parties
_____________,
2007
MAXIM
GROUP LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Re:
Response
Genetics, Inc. Lock-Up Agreement
Ladies
and Gentlemen:
This
letter agreement (this “Agreement”)
relates to the public offering (the “Offering”)
by
Response Genetics, Inc., a company organized and existing under the laws of
the
State of Delaware (the “Company”),
of
shares of its common stock, par value $0.01 per share (the “Common Shares”).
The
Offering is governed by a certain Underwriting Agreement (the “Underwriting
Agreement”),
to be
entered into by and between the Company and Maxim Group LLC (the “Representative”),
as
representative of the several underwriters named therein.
In
order
to induce the Representative to underwrite the Offering, the undersigned hereby
agrees that, without the prior written consent of the Representative, which
consent shall not be unreasonably withheld, during the period from the date
hereof until and through the twelve (12) month anniversary of the closing of
the
offering contemplated by the Underwriting Agreement (the “Lock-Up
Period”),
the
undersigned: (a) will not, directly or indirectly, offer, sell, agree to offer
or sell, solicit offers to purchase, grant any call option or purchase any
put
option with respect to, pledge, borrow or otherwise dispose of any Relevant
Security (as defined below), and (b) will not establish or increase any “put
equivalent position” or liquidate or decrease any “call equivalent position”
with respect to any Relevant Security (in each case within the meaning of
Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and
regulations promulgated thereunder), or otherwise enter into any swap,
derivative or other transaction or arrangement that transfers to another, in
whole or in part, any economic consequence of ownership of a Relevant Security,
whether or not such transaction is to be settled by delivery of Relevant
Securities, other securities, cash or other consideration.
As
used
herein, the term “Relevant
Security”
means
any Common Shares or other security of the Company thereof that is convertible
into, or exercisable or exchangeable for Common Shares or equity securities
of
the Company or that holds the right to acquire any Common Shares or equity
securities of the Company or any other such Relevant Security.
The
undersigned hereby authorizes the Company during the Lock-Up Period to cause
any
transfer agent for the Relevant Securities to decline to transfer, and to note
stop transfer restrictions on the stock register and other records relating
to,
Relevant Securities for which the undersigned is the record holder and, in
the
case of Relevant Securities for which the undersigned is the beneficial but
not
the record holder, agrees during the Lock-Up Period to cause the record holder
to cause the relevant transfer agent to decline to transfer, and to note stop
transfer restrictions on the stock register and other records relating to,
such
Relevant Securities.
IV-1
The
undersigned hereby further agrees that, without the prior written consent of
the
Representative, which consent shall not be unreasonably withheld, during the
Lock-Up Period the undersigned will not: (x) file or participate in the filing
with the Securities and Exchange Commission of any registration statement,
or
circulate or participate in the circulation of any preliminary or final
prospectus or other disclosure document with respect to any proposed offering
or
sale of a Relevant Security and (y) exercise any rights the undersigned may
have
to require registration with the Securities and Exchange Commission of any
proposed offering or sale of a Relevant Security.
Notwithstanding
the foregoing, and subject to the conditions below, the undersigned may transfer
the Relevant Securities in the transactions described in clauses (i) through
(vi) below without the prior written consent of Maxim, provided that (1) Maxim
receives a signed lock-up agreement for the balance of the lock-up period from
each donee, trustee, distributee, or transferee, as the case may be, (2) any
such transfer shall not involve a disposition for value, (3) such transfers
are
not required to be reported in any public report or filing with the Securities
and Exchange Commission, or otherwise during the lock-up period and (4) the
undersigned does not otherwise voluntarily effect any public filing or report
regarding such transfers during the lock-up period:
| (i) |
as
a bona fide gift or gifts; or
|
| (ii) |
to
any trust for the direct or indirect benefit of the undersigned or
the
immediate family of the undersigned;
or
|
| (iii) |
as
a distribution to members,
partners or stockholders of the
undersigned;
|
| (iv) |
to
the undersigned’s affiliates or to any investment fund or other entity
controlled or managed by the undersigned, provided that such affiliate,
investment fund or other entity controlled or managed by the undersigned
shall not be formed for the sole purpose of transferring, for value
or
otherwise, the Relevant Securities;
or
|
| (v) |
to
any beneficiary of the undersigned pursuant to a will or other
testamentary document or applicable laws of descent;
or
|
| (vi) |
to
any corporation, partnership, limited liability company or other
entity
all of the beneficial ownership interests of which are held by the
undersigned or immediate family of the
undersigned.
|
For
purposes of this lock-up agreement, “immediate family” shall mean any
relationship by blood, marriage or adoption, not more remote than first
cousin.
Furthermore,
notwithstanding the foregoing, during the lock-up period, the undersigned
may
sell
shares of Common Stock of the Company purchased by the undersigned on the open
market following the Public Offering if and only if (i) such sales are not
required to be reported in any public report or filing with the Securities
Exchange Commission, or otherwise and (ii) the undersigned does not otherwise
voluntarily effect any public filing or report regarding such sales.
IV-2
The
undersigned hereby represents and warrants to the Representative and the Company
that the undersigned has full power and authority to enter into this Agreement
and that this Agreement constitutes the legal, valid and binding obligation
of
the undersigned, enforceable in accordance with its terms. Upon request, the
undersigned will execute any additional documents necessary in connection with
enforcement hereof. Any obligations of the undersigned shall be binding upon
the
successors and assigns of the undersigned from the date first above written.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without regard to the conflicts of laws principles thereof.
Delivery of a signed copy of this letter by facsimile transmission shall be
effective as delivery of the original hereof.
| Very truly yours, | ||
| |
|
|
|
|
||
IV-3