AVANIR PHARMACEUTICALS, INC. 12,500,000 SHARES OF COMMON STOCK CONTROLLED EQUITY OFFERINGSM SALES AGREEMENT
Exhibit 10.2
AVANIR PHARMACEUTICALS, INC.
12,500,000 SHARES OF COMMON STOCK
12,500,000 SHARES OF COMMON STOCK
CONTROLLED
EQUITY
OFFERINGSM
July 30, 2009
CANTOR ▇▇▇▇▇▇▇▇▇▇ & CO.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
AVANIR PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), confirms its
agreement (this “Agreement”) with Cantor ▇▇▇▇▇▇▇▇▇▇ & Co. (“CF&Co”), as follows:
1. Issuance and Sale of Shares. The Company agrees that, from time to time during
the term of this Agreement, on the terms and subject to the conditions set forth herein, it may
issue and sell through CF&Co, acting as agent and/or principal, up to 12,500,000 shares (the
“Placement Shares”) of the Company’s common stock, par value $0.0001 per share (the
“Common Stock”), with gross proceeds of up to $35,000,000. Notwithstanding anything to the
contrary contained herein, the parties hereto agree that compliance with the limitation set forth
in this Section 1 on the number of Placement Shares issued and sold under this Agreement
shall be the sole responsibility of the Company, and CF&Co shall have no obligation in connection
with such compliance, provided that CF&Co strictly follows the trading instructions provided
pursuant to any Placement Notice. The issuance and sale of Placement Shares through CF&Co will be
effected pursuant to the Registration Statement (as defined below) filed by the Company and
declared effective by the Securities and Exchange Commission (the “Commission”), although
nothing in this Agreement shall be construed as requiring the Company to use the Registration
Statement (as defined below) to issue Common Stock.
The Company has filed, in accordance with the provisions of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (collectively, the “Securities
Act”), with the Commission a Registration Statement on Form S-3 (No. 333-158665), including a
base prospectus, relating to certain securities, including the Placement Shares to be issued from
time to time by the Company, and which incorporates by reference documents that the Company has
filed or will file in accordance with the provisions of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (collectively, the “Exchange
Act”). The Company has prepared a prospectus supplement specifically relating to the Common
Stock (the “Prospectus Supplement”) to the base prospectus included as part of such
registration statement. The Company has furnished to CF&Co, for use by CF&Co, copies of the
prospectus included as part of such registration statement, as supplemented by the Prospectus
Supplement, relating to the Placement Shares. Except where the context otherwise requires, such
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registration statement, as amended when it became effective, including all documents filed as
part thereof or incorporated by reference therein, and including any information contained in a
Prospectus (as defined below) subsequently filed with the Commission pursuant to Rule 424(b) under
the Securities Act or deemed to be a part of such registration statement pursuant to Rule 430B or
462(b) of the Securities Act, as well as any comparable successor registration statement filed by
the Company for the sale of shares of its Common Stock, including the Placement Shares,
collectively are herein called the “Registration Statement.” The base prospectus ,
including all documents incorporated therein by reference, included in the Registration Statement,
as it may be supplemented by the Prospectus Supplement, in the form in which such prospectus and/or
Prospectus Supplement have most recently been filed by the Company with the Commission pursuant to
Rule 424(b) under the Securities Act is herein called the “Prospectus.” Any reference
herein to the Registration Statement, the Prospectus or any amendment or supplement thereto shall
be deemed to refer to and include the documents incorporated by reference therein, and any
reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration
Statement or the Prospectus shall be deemed to refer to and include the filing after the execution
hereof of any document with the Commission deemed to be incorporated by reference therein. For
purposes of this Agreement, all references to the Registration Statement, the Prospectus or to any
amendment or supplement thereto shall be deemed to include any copy filed with the Commission
pursuant to either the Electronic Data Gathering Analysis and Retrieval System or Interactive Data
Electronic Applications (collectively “IDEA”).
2. Placements. Each time that the Company wishes to issue and sell the Placement
Shares hereunder (each, a “Placement”), it will notify CF&Co by email notice (or other
method mutually agreed to in writing by the parties) (a “Placement Notice”) containing the
parameters in accordance with which it desires the Placement Shares to be sold, which shall at a
minimum include the number of Placement Shares to be issued, the time period during which sales are
requested to be made, any limitation on the number of Placement Shares that may be sold in any one
Trading Day (as defined in Section 3) and any minimum price below which sales may not be
made, a form of which containing such minimum sales parameters necessary is attached hereto as
Schedule 1. The Placement Notice shall originate from any of the individuals from the
Company set forth on Schedule 2 (with a copy to each of the other individuals from the
Company listed on such schedule), and shall be addressed to each of the individuals from CF&Co set
forth on Schedule 2, as such Schedule 2 may be amended from time to time. The
Placement Notice shall be effective upon receipt by CF&Co unless and until (i) in accordance with
the notice requirements set forth in Section 4, CF&Co declines to accept the terms
contained therein for any reason, in its sole discretion, (ii) the entire amount of the Placement
Shares have been sold, (iii) in accordance with the notice requirements set forth in Section
4, the Company suspends or terminates the Placement Notice, (iv) the Company issues a
subsequent Placement Notice with parameters superseding those on the earlier dated Placement
Notice, or (iv) the Agreement has been terminated under the provisions of Section 11. The
amount of any discount, commission or other compensation to be paid by the Company to CF&Co in
connection with the sale of the Placement Shares shall be calculated in accordance with the terms
set forth in Schedule 3. It is expressly acknowledged and agreed that neither the Company
nor CF&Co will have any obligation whatsoever with respect to a Placement or any Placement Shares
unless and until the Company delivers a Placement Notice to CF&Co and CF&Co does not decline such
Placement Notice pursuant to the terms set forth above, and then only upon the
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terms specified therein and herein. In the event of a conflict between the terms of this
Agreement and the terms of a Placement Notice, the terms of the Placement Notice will control.
3. Sale of Placement Shares by CF&Co. Subject to the terms and conditions herein set
forth, upon the Company’s issuance of a Placement Notice, and unless the sale of the Placement
Shares described therein has been declined, suspended, or otherwise terminated in accordance with
the terms of this Agreement, CF&Co, for the period specified in the Placement Notice, will use its
commercially reasonable efforts consistent with its normal trading and sales practices and
applicable state and federal laws, rules and regulations and the rules of the NASDAQ Global Market
(the “Exchange”), to sell such Placement Shares up to the amount specified, and otherwise
in accordance with the terms of such Placement Notice. CF&Co will provide written confirmation to
the Company (including by email correspondence) no later than the opening of the Trading Day (as
defined below) next following the Trading Day on which it has made sales of Placement Shares
hereunder setting forth the number of Placement Shares sold on such day, the compensation payable
by the Company to CF&Co with respect to such sales pursuant to Section 2, and the Net
Proceeds (as defined below) payable to the Company, with an itemization of deductions made by CF&Co
(as set forth in Section 5(a)) from gross proceeds for the Placement Shares that it
receives from such sales. CF&Co may sell Placement Shares by any method permitted by law deemed to
be an “at the market” offering as defined in Rule 415 of the Securities Act, including without
limitation sales made directly on the Exchange, on any other existing trading market for the Common
Stock or to or through a market maker. With the prior express written consent of the Company,
which may be provided in its Placement Notice, CF&Co may also sell Placement Shares in privately
negotiated transactions. During the term of this Agreement and notwithstanding anything to the
contrary herein, CF&Co agrees that in no event will it or any CF&Co Affiliate engage in any market
making, bidding, stabilization or other trading activity with regard to the Common Stock if such
activity would be prohibited under Regulation M or other anti-manipulation rules under the
Securities Act. The Company acknowledges and agrees that (i) there can be no assurance that CF&Co
will be successful in selling Placement Shares, and (ii) CF&Co will incur no liability or
obligation to the Company or any other person or entity if it does not sell Placement Shares for
any reason other than a failure by CF&Co to use its commercially reasonable efforts consistent with
its normal trading and sales practices to sell such Placement Shares as required under this
Section 3. For the purposes hereof, “Trading Day” means any day on which shares of
the Common Stock are purchased and sold on the principal market on which the Common Stock is listed
or quoted.
4. Suspension of Sales. The Company or CF&Co may, upon notice to the other party in
writing (including by email correspondence to each of the individuals of the other party set forth
on Schedule 2, if receipt of such correspondence is actually acknowledged by any of the
individuals to whom the notice is sent, other than via auto-reply) or by telephone (confirmed
immediately by verifiable facsimile transmission or email correspondence to each of the individuals
of the other party set forth on Schedule 2), suspend any sale of Placement Shares;
provided, however, that such suspension shall not affect or impair either party’s obligations with
respect to any Placement Shares sold hereunder prior to the receipt of such notice. Each of the
Parties agrees that no such notice under this Section 4 shall be effective against the
other unless it is made to one of the individuals named on Schedule 2 hereto, as such
schedule may be amended from time to time.
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5. Settlement.
(a) Settlement of Placement Shares. Unless otherwise specified in the applicable
Placement Notice, settlement for sales of Placement Shares will occur on the third
(3rd) Business Day (or such earlier day as is industry practice for regular-way
trading) following the date on which such sales are made (each, a “Settlement Date” and
the first such settlement date, the “First Delivery Date”). The amount of proceeds to be
delivered to the Company on a Settlement Date against receipt of the Placement Shares sold (the
“Net Proceeds”) will be equal to the aggregate sales price received by CF&Co at which
such Placement Shares were sold, after deduction for (i) CF&Co’s commission, discount or other
compensation for such sales payable by the Company pursuant to Section 2 hereof, (ii) any
other amounts due and payable by the Company to CF&Co hereunder pursuant to Section 7(g)
(Expenses) hereof, and (iii) any transaction fees imposed by any governmental or self-regulatory
organization in respect of such sales.
(b) Delivery of Placement Shares. On or before each Settlement Date, the Company
will, or will cause its transfer agent to, electronically transfer the Placement Shares being
sold by crediting CF&Co’s or its designee’s account (provided CF&Co shall have given the Company
written notice of such designee at least one Business Day prior to the Settlement Date) at The
Depository Trust Company through its Deposit and Withdrawal at Custodian System or by such other
means of delivery as may be mutually agreed upon by the parties hereto which in all cases shall
be freely tradeable, transferable, registered shares in good deliverable form. On each
Settlement Date, CF&Co will deliver the related Net Proceeds in same-day funds to an account
designated by the Company on, or prior to, the Settlement Date. The Company agrees that if the
Company, or its transfer agent (if applicable), defaults in its obligation to deliver Placement
Shares on a Settlement Date, the Company will, in addition to and in no way limiting the rights
and obligations set forth in Section 9(a) (Indemnification and Contribution), (i) hold
CF&Co harmless against any loss, claim, damage, or expense (including reasonable legal fees and
expenses), as incurred, arising out of or in connection with such default by the Company and (ii)
pay to CF&Co any commission, discount, or other compensation to which it would otherwise have
been entitled absent such default; provided, however, that the Company shall not be obligated to
so indemnify and reimburse CF&Co if the Placement Shares are not timely delivered due to (i) a
suspension or material limitation in trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ Stock Market; (ii) a general moratorium on
commercial banking activities declared by either federal or New York State authorities or a
material disruption in commercial banking or securities settlement or clearance services in the
United States; (iii) an outbreak or escalation of hostilities or acts of terrorism involving the
United States or a declaration by the United States of a national emergency or war; or (iv) any
other calamity or crisis or any change in financial, political or economic conditions in the
United States or elsewhere.
6. Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, CF&Co that as of each Applicable Time (as defined in Section
20(a)):
(a) Compliance with Registration Requirements. The Registration Statement has been
filed with the Commission under the Securities Act and declared effective by the Commission under
the Securities Act. The Company has complied with all requests of the Commission for additional
or supplemental information. No stop order suspending the effectiveness of the
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Registration Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the Company’s knowledge, are contemplated or threatened by the Commission.
The Company satisfied all applicable requirements for the use of Form S-3 under the Securities
Act when the Registration Statement was filed. The Commission has not issued an order preventing
or suspending the use of the base prospectus, any Free Writing Prospectus (as defined below) or
the Prospectus relating to the proposed offering of the Placement Shares and no proceedings for
such purpose have been instituted or are pending or, to the Company’s knowledge, are contemplated
or threatened by the Commission. The Prospectus delivered to CF&Co for use in connection with the
offering of Placement Shares was, at the time of such delivery, identical to the electronically
transmitted copies thereof filed with the Commission pursuant to IDEA, except to the extent
permitted by Regulation S-T. At the respective times each part of the Registration Statement and
each amendment thereto became effective or was deemed effective, as the case may be, the
Registration Statement complied and will comply in all material respects with the Securities Act
and did not and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein not
misleading. The immediately preceding sentence does not apply to statements in or omissions from
the Registration Statement or any amendments or supplements thereto based upon and in conformity
with written information furnished to the Company by CF&Co specifically for use therein.
(b) Delivery of Offering Materials. The Company has delivered to CF&Co, or made
available through IDEA, one complete copy of the Registration Statement and of each consent of
experts filed as a part thereof, and conformed copies of the Registration Statement (without
exhibits), and the Prospectus, as amended or supplemented, in such quantities and at such places
as CF&Co has reasonably requested.
(c) Prospectus. Neither the Prospectus nor any amendments or supplements thereto, at
the time the Prospectus or any such amendment or supplement was issued, as of the date hereof and
at each Applicable Time, as the case may be, included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading.
The foregoing sentence does not apply to statements in or omissions from the Prospectus or any
amendments or supplements thereto based upon and in conformity with written information furnished
to the Company by CF&Co specifically for use therein.
(d) Financial Information. The financial statements of the Company, together with
the related schedules and notes thereto, set forth or included or incorporated by reference in
the Registration Statement and the Prospectus fairly present, in all material respects, the
financial condition of the Company as of and at the dates indicated and the results of
operations, changes in financial position, stockholders’ equity and cash flows for the periods
therein specified. Such financial statements, schedules, and notes are in conformity with GAAP
as consistently applied in the United States throughout the periods involved (except as otherwise
stated therein). Any selected financial data included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the information shown therein and, to
the extent based upon or derived from the financial statements, have been compiled on a basis
consistent with the financial statements presented therein. Any pro forma financial statements
of the Company, and the related notes thereto, included or incorporated by reference in the
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Registration Statement and the Prospectus present fairly the information shown therein, have
been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma
financial statements and have been properly compiled on the basis described therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred to therein. The Company
does not have any material liabilities or obligations, direct or contingent (including any
off-balance sheet obligations), not disclosed in the Registration Statement and the Prospectus.
No other financial statements are required to be set forth or to be incorporated by reference in
the Registration Statement or the Prospectus under the Securities Act.
(e) Incorporated Documents. Each document incorporated or deemed to be incorporated
by reference in the Registration Statement or the Prospectus heretofore filed, at the time it was
or hereafter is filed with the Commission, conformed and will conform when filed in all material
respects with the requirements of the Exchange Act and the rules and regulations promulgated
thereunder; no such document when it was filed (or, if an amendment with respect to any such
document was filed, when such amendment was filed), contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading; and no such document, when it is filed, will contain
an untrue statement of a material fact or will omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not misleading.
(f) Distribution of Materials; Free Writing Prospectuses. The Company is not an
“ineligible issuer” in connection with the offering pursuant to Rules 164, 405 and 433 under the
Securities Act. The Company has not, directly or indirectly, distributed and will not distribute
any prospectus or other offering material in connection with the offering and sale of the
Placement Shares other than the Prospectus and other materials, if any, permitted under the
Securities Act to be distributed. Each “issuer free writing prospectus” (a “Free Writing
Prospectus”), as defined in Rule 433 under the Securities Act (“Rule 433”), relating
to the Placement Shares that (i) was required to be filed with the Commission by the Company or
(ii) is exempt from filing pursuant to Rule 433(d)(5)(i), in each case in the form filed or
required to be filed with the Commission or, if not required to be filed, in the form retained in
the Company’s records pursuant to Rule 433(g), as of its issue date and as of each Applicable
Time (as defined in Section 20 below), did not, does not and will not include any
information that conflicted, conflicts or will conflict with the information contained in the
Registration Statement or the Prospectus, including any incorporated document deemed to be a part
thereof that has not been superseded or modified. The foregoing sentence does not apply to
statements in or omissions from any Free Writing Prospectus based upon and in conformity with
written information furnished to the Company by CF&Co specifically for use therein. The Company
has satisfied or will satisfy the conditions in Rule 433 to avoid a requirement to file with the
Commission any electronic road show.
(g) Organization. The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of Delaware with full corporate power
and authority necessary to own, hold, lease and/or operate its assets and properties and to
conduct the business in which it is engaged and as described in the Registration Statement and
Prospectus; and the Company is duly qualified as a foreign entity to transact business and is in
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good standing in each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business, except where the
failure, individually or in the aggregate, to be so qualified and be in good standing would not
have a material adverse effect on (i) the consolidated business, operations, assets, properties,
financial condition, reputation, prospects, or results of operations of the Company and any
subsidiaries which may be incorporated or formed from time to time (the “Subsidiaries”)
taken as a whole, (ii) the transactions contemplated hereby, or (iii) the ability of the Company
to perform its obligation under this Agreement (collectively, a “Material Adverse
Effect”). The Company has full corporate power and authority necessary to enter into and
perform its obligations under this Agreement and to consummate the transactions contemplated
hereby. The Company is in compliance with the laws, orders, rules, regulations and directives
applicable to it, except for any noncompliance that, individually, or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Complete and correct copies of the
certificate of incorporation and of the bylaws of the Company and all amendments thereto have
been delivered or made available to CF&Co.
(h) Subsidiaries. The Company has no “significant subsidiaries” (as such term is
defined in Rule 1-02 of Regulation S-X promulgated under the Securities Act). The Company does
not own, directly or indirectly, any shares of stock or any other equity interests or long-term
debt securities of any corporation, firm, partnership, joint venture, association or other
entity.
(i) No Violation or Default. Neither the Company nor any of its Subsidiaries is (i)
in violation of any provision of its charter or bylaws or similar organizational documents, (ii)
in default in any respect, and no event has occurred which, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance of any term, covenant, or
condition of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to which it is a
party or by which it is bound or to which any of its property or assets is subject, (iii) in
violation in any respect of any statute, law, rule, regulation, ordinance, judgment, order or
decree of any court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company, its Subsidiaries or any of its properties,
as applicable (including, without limitation, those administered by the Food and Drug
Administration of the U.S. Department of Health and Human Services (the “FDA”) or by any
foreign, federal, state or local governmental or regulatory authority performing functions
similar to those performed by the FDA), or (iv) in violation of any rule or regulation of any
self-regulating organization or other non-governmental regulatory authority (including, without
limitation, the rules and regulations of the Exchange) except, with respect to clauses (ii),
(iii), and (iv), any violations or defaults which, singularly or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect. The execution, delivery and
performance of this Agreement, the issuance and sale of the Placement Shares and the consummation
of the transactions contemplated hereby will not conflict with, or result in any breach of or
constitute a default under (nor constitute any event which with notice, lapse of time or both
would result in any breach of, or constitute a default under), (i) any provision of the charter,
bylaws or organizational documents, as the case may be, of the Company or any of its
Subsidiaries, (ii) any provision of any contract, license, repurchase agreement, management
agreement, indenture, mortgage, deed of trust, bank loan or credit agreement, note, lease or
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other evidence of indebtedness, or any lease, contract or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries, or any of their respective assets or properties may be bound or affected, except
for any breach or default that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, (iii) any federal, state, local or foreign law,
regulation or rule or any decree, judgment or order applicable to the Company or any of its
Subsidiaries, or (iv) any rule or regulation of any self-regulating organization or other
non-governmental regulatory authority (including, without limitation, the rules and regulations
of the Exchange), except for any breach or default that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.
(j) Capitalization. As of September 30, 2008, the Company had an authorized, issued
and outstanding capitalization as set forth on its balance sheet included in the Company’s Annual
Report on Form 10-K for the fiscal year ended September 30, 2008. All of the issued and
outstanding shares of capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable, have been issued in compliance with all federal and
state securities laws and were not issued in violation of any preemptive right, resale right,
right of first refusal or similar right.
(k) Authorization; Enforceability. This Agreement has been duly authorized,
executed and delivered by the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except to the extent that (i) enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general equitable principles and (ii) the indemnification and
contribution provisions of Section 9 hereof may be limited by federal or state securities
laws and public policy considerations in respect thereof.
(l) Capital Stock and Placement Shares in Proper Form. The capital stock of the
Company, including the Placement Shares, conforms in all material respects to the description
thereof contained in the Registration Statement and the Prospectus. The holders of the Placement
Shares will not be subject to personal liability under the Delaware General Corporation Law by
reason of being such holders.
(m) Authorization of Placement Shares. The Placement Shares, when issued and
delivered pursuant to the terms approved by the Board of Directors or a duly designated committee
thereof, against payment therefor as provided herein, will be duly and validly authorized and
issued and fully paid and non-assessable, free and clear of any pledge, lien, encumbrance,
security interest or other claim, including any statutory or contractual preemptive rights,
resale rights, rights of first refusal or other similar rights, and will be registered pursuant
to Section 12 of the Exchange Act.
(n) Consents and Permits. (1) The Company and its Subsidiaries have made all
filings, applications and submissions required by, and possesses all approvals, licenses,
certificates, certifications, clearances, consents, exemptions, marks, notifications, orders,
permits and other authorizations issued by, the appropriate federal, state or foreign regulatory
authorities (including, without limitation, the FDA, and any other foreign, federal, state or
local government or regulatory authorities performing functions similar to those performed by the
FDA) necessary for the ownership or lease of their respective properties or to conduct its
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businesses as described in the Registration Statement and the Prospectus (collectively,
“Permits”), except for such Permits the failure of which to possess, obtain or make the
same would not reasonably be expected to have a Material Adverse Effect; and neither the Company
nor any of its Subsidiaries has received any written notice of proceedings relating to the
limitation, revocation, cancellation, suspension, modification or non-renewal of any such Permit
which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect, and has any reason to believe that any such license,
certificate, permit or authorization will not be renewed in the ordinary course. (2) No
approval, authorization, consent or order of or filing with any national, state or local
governmental or regulatory commission, board, body, authority or agency is required in connection
with the issuance and sale of the Placement Shares or the consummation by the Company of the
transactions contemplated hereby (including, without limitation, the Exchange, or approval of the
stockholders of the Company (including as may be required pursuant to Rule 5635 of the NASDAQ
Marketplace Rules)), other than (i) registration of the Placement Shares under the Securities
Act, (ii) any necessary qualification under the securities or blue sky laws of the various
jurisdictions in which the Placement Shares are being offered by CF&Co, (iii) filing of any
reports under the Exchange Act, or (iv) such approvals as may be required by the Conduct Rules of
the Financial Industry Regulatory Authority, Inc. (“FINRA”).
(o) No Preferential Rights. Except as set forth in the Registration Statement and
the Prospectus, (i) no person, as such term is defined in Rule 1-02 of Regulation S-X promulgated
under the Securities Act (each, a “Person”), has the right, contractual or otherwise, to
cause the Company to issue or sell to such Person any shares of Common Stock or shares of any
other capital stock or other securities of the Company, (ii) no Person has any preemptive rights,
resale rights, rights of first refusal, or any other rights (whether pursuant to a “poison pill”
provision or otherwise) to purchase any shares of Common Stock or shares of any other capital
stock or other securities of the Company, (iii) except as disclosed to CF&Co or its agents in
connection with the transactions contemplated hereby, no Person has the right to act as an
underwriter or as a financial advisor to the Company in connection with the offer and sale of the
Placement Shares, and (iv) no Person has the right, contractual or otherwise, to require the
Company to register under the Securities Act any shares of Common Stock or shares of any other
capital stock or other securities of the Company, or to include any such shares or other
securities in the Registration Statement or the offering contemplated thereby, whether as a
result of the filing or effectiveness of the Registration Statement or the sale of the Placement
Shares as contemplated thereby or otherwise.
(p) Independent Public Accountant. KMJ ▇▇▇▇▇▇ & Company, LLP, whose report on the
financial statements of the Company is filed with the Commission as part of the Registration
Statement and the Prospectus, are and, during the periods covered by their report, were (i) an
independent public accounting firm within the meaning of the Securities Act, (ii) a registered
public accounting firm (as defined in Section 2(a)(12) of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act), and (iii) not
in violation of the auditor independence requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(q) Enforceability of Agreements. To the knowledge of the Company, all agreements
between the Company and third parties expressly referenced in the Prospectus are legal, valid and
binding obligations of the Company enforceable in accordance with their respective terms,
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except to the extent that (i) enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally and by general
equitable principles and (ii) the indemnification provisions of certain agreements may be limited
be federal or state securities laws or public policy considerations in respect thereof and except
for any other potentially unenforceable term that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(r) No Litigation. Except as disclosed in the Registration Statement and the
Prospectus, there are no actions, suits, claims, investigations, inquiries or proceedings pending
or, to the Company’s knowledge, threatened, to which either the Company or, to the Company’s
knowledge, its Subsidiaries, nor any of their respective officers or directors, is a party or of
which any of their respective properties or other assets is subject at law or in equity, or
before or by any federal, state, local or foreign governmental or regulatory commission, board,
body, authority or agency, or before any self-regulating organization or other non-governmental
regulatory authority (including, without limitation, the Exchange), which if resolved adversely
to the Company or any Subsidiary would, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(s) Regulatory Filings. Neither the Company nor any of its Subsidiaries has failed
to file with the applicable regulatory authorities (including, without limitation, the FDA or any
foreign, federal, state or local governmental or regulatory authority performing functions
similar to those performed by the FDA) any required filing, declaration, listing, registration,
report or submission, except for such failures that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect; all such filings, declarations,
listings, registrations, reports or submissions were in compliance with applicable laws when
filed and no deficiencies have been asserted by any applicable regulatory authority with respect
to any such filings, declarations, listings, registrations, reports or submissions, except for
any deficiencies that, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect.
(t) Market Capitalization. As of the date of this Agreement, the aggregate market
value of the Company’s voting stock held by nonaffiliates of the Company was equal to or greater
than $100 million.
(u) No Material Changes. Subsequent to the respective dates as of which information
is given in, or incorporated by reference into, the Registration Statement and the Prospectus,
there has not been (i) any change, development or event that has caused, or could reasonably be
expected to result, individually or in the aggregate, in a Material Adverse Effect, (ii) any
change in the number of authorized shares of capital stock, (iii) any transaction that is
material to the Company and its Subsidiaries taken as a whole, or (iv) any obligation or
liability, direct or contingent (including any off-balance sheet obligations), incurred by the
Company or its Subsidiaries, that is material to the Company and its Subsidiaries taken as a
whole.
(v) No Material Defaults. Neither the Company nor any of its Subsidiaries has
defaulted on any installment on indebtedness for borrowed money or on any rental on one or more
long-term leases, which defaults, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect. The Company has not filed a report pursuant to Section 13(a)
or 15(d) of the Exchange Act since the filing of its last Annual Report on Form
10
10-K indicating that it (i) has failed to pay any dividend or sinking fund installment on
preferred stock or (ii) has defaulted on any installment on indebtedness for borrowed money or on
any rental on one or more long-term leases, which defaults, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(w) Certain Market Activities. Neither the Company nor, to the Company’s knowledge,
any of its Subsidiaries, nor, to the Company’s knowledge, any of their respective directors,
officers or controlling persons has taken, directly or indirectly, any action designed, or that
has constituted or might reasonably be expected to cause or result in, under the Exchange Act or
otherwise, the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Placement Shares.
(x) Broker/Dealer Relationships. Neither the Company nor any of its Subsidiaries
or any related entities (i) is required to register as a “broker” or “dealer” in accordance with
the provisions of the Exchange Act or (ii) directly or indirectly through one or more
intermediaries, controls or is a “person associated with a FINRA member” or “associated person of
a FINRA member” (within the meaning of Article I of the Bylaws of the NASD).
(y) No Reliance. The Company has not relied upon CF&Co or legal counsel for CF&Co
for any legal, tax or accounting advice in connection with the offering and sale of the Placement
Shares.
(z) Taxes. The Company and, to the Company’s knowledge, any of its Subsidiaries has
filed on a timely basis (taking into account all applicable extensions) all necessary federal,
state, local and foreign income and franchise tax returns, if any such returns were required to
be filed, through the date hereof and have paid all taxes shown as due thereon except for any
failure to file or pay which, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. No tax deficiency has been asserted against the Company or,
to the Company’s knowledge, any of its Subsidiaries, nor does the Company know of any tax
deficiency that is likely to be asserted against any such entity that, if determined adversely to
any such entity, could reasonably be expected to have a Material Adverse Effect. All tax
liabilities, if any, are adequately provided for on the books of the Company and, to the
Company’s knowledge, any of its Subsidiaries, except for such tax liabilities that, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
(aa) Intellectual Property. Except as set forth in the Prospectus, the Company and
its Subsidiaries own, possess, license or have other rights to use all foreign and domestic
patents, patent applications, trade and service marks, trade and service ▇▇▇▇ registrations,
trade names, copyrights, licenses, inventions, trade secrets, technology, Internet domain names,
know-how and other intellectual property (collectively, the “Intellectual Property”),
necessary for the conduct of their respective businesses as now conducted or as proposed in the
Prospectus to be conducted except to the extent that the failure to own, possess, license or
otherwise hold adequate rights to use such Intellectual Property would not, individually or in
the aggregate, have a Material Adverse Effect. Except as set forth in the Prospectus, (a) there
are no rights of third parties to any such Intellectual Property owned by the Company and its
Subsidiaries; (b) to the Company’s knowledge, there is no infringement by third parties of any
such Intellectual Property; (c) to the Company’s knowledge, there is no pending or threatened
action, suit, proceeding or claim by others challenging the Company’s and its Subsidiaries’
11
rights in or to any such Intellectual Property, and the Company is unaware of any facts which could form a
reasonable basis for any such action, suit, proceeding or claim; (d) to the Company’s knowledge,
there is no pending or threatened action, suit, proceeding or claim by others challenging the
validity or scope of any such Intellectual Property; (e) there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by others that the Company and its
Subsidiaries infringe or otherwise violate any patent, trademark, copyright, trade secret or
other proprietary rights of others; (f) to the Company’s knowledge, there is no third-party U.S.
patent or published U.S. patent application which contains claims for which an Interference
Proceeding (as defined in 35 U.S.C. § 135) has been commenced against any patent or patent
application described in the Prospectus as being owned by or licensed to the Company; (g) the
Company and its Subsidiaries have complied with the terms of each agreement pursuant to which
Intellectual Property has been licensed to the Company or such Subsidiary, and all such
agreements are in full force and effect; (h) to the Company’s knowledge, there is no prior art
that may render any patent application within the Intellectual Property unpatentable that has not
been disclosed to the U.S. Patent and Trademark Office; (i) to the Company’s knowledge, the
manufacture, use or sale of the product candidates described in the Prospectus as under
development by the Company or its Subsidiaries falls or would fall within the scope of one or
more claims of one or more patents or patent applications owned by, or exclusively licensed to,
the Company or its Subsidiaries; and (j) to the Company’s knowledge, each issued patent was
validly issued under the laws of the country that issued it, except, in the case of any of
clauses (b), (c), (d) and (e) above, for any such infringement by third parties or any such
pending or threatened suit, action, proceeding or claim as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(bb) Clinical Studies. The clinical, pre-clinical and other studies and tests
conducted by or on behalf of or sponsored by the Company and its Subsidiaries were and, if still
pending, are being conducted in accordance in all material respects with all statutes, laws,
rules and regulations, as applicable (including, without limitation, those administered by the
FDA or by any foreign, federal, state or local governmental or regulatory authority performing
functions similar to those performed by the FDA). The descriptions in the Registration Statement
and Prospectus of the results of such studies and tests are accurate and complete in all material
respects. Except as set forth in the Prospectus, neither the Company nor any of its Subsidiaries
has received any notices or other correspondence from the FDA or any other foreign, federal,
state or local governmental or regulatory authority performing functions similar to those
performed by the FDA with respect to any ongoing clinical or pre-clinical studies or tests
requiring the termination or suspension of such studies or tests. The Company is in compliance
with all applicable federal, state, local and foreign laws, regulations, orders, and decrees
governing its business as prescribed by the FDA, or any other federal, state, or foreign agencies
or bodies, including those bodies and agencies engaged in the regulation of pharmaceuticals or
biohazardous substances or materials, except where non-compliance would not, individually, or in
the aggregate, have a Material Adverse Effect.
(cc) Compliance Program. The Company has established and administers a compliance
program applicable to the Company, to assist the Company and the directors, officers and
employees of the Company in complying with applicable regulatory guidelines (including, without
limitation, those administered by the FDA and any other foreign, federal,
12
state or local governmental or regulatory authority performing functions similar to those
performed by the FDA).
(dd) Environmental Laws. The Company and its Subsidiaries: (i) are in compliance
with any and all applicable federal, state, local and foreign laws, rules, regulations, decisions
and orders relating to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants (collectively, “Environmental
Laws”); (ii) have received and are in compliance with all permits, licenses and other
approvals required of them under applicable Environmental Laws to conduct their respective
businesses as described in the Registration Statement and the Prospectus; and (iii) have not
received notice of any actual or potential liability for the investigation or remediation of any
disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants,
except, in the case of any of clauses (i), (ii) or (iii) above, for any such failure to comply or
failure to receive required permits, licenses, or other approvals or any such liability as would
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(ee) Accounting Controls. The Company and its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management’s general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with GAAP
and to maintain accountability for assets; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(ff) Disclosure Controls. The Company has established and maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15e and 15d-15e under the Exchange
Act), which are designed to ensure that material information relating to the Company is made
known to the Company’s principal executive officer and its principal financial officer by others
within those entities, and that such disclosure controls and procedures are appropriate to allow
timely decisions regarding required disclosure to be included in the Company’s periodic filings
under the Exchange Act. The Company’s certifying officers have evaluated the effectiveness of the
Company’s disclosure controls and procedures as of the most recently ended quarter (such date,
the “Evaluation Date”). The Company presented in its most recently filed periodic report
the conclusions of the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Except as disclosed in the
Registration Statement and the Prospectus and since the Evaluation Date, there have been no
changes in the Company’s internal control over financial reporting (as such term is defined in
Exchange Act Rules 13a-15 and 15d-15) that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting. The Company’s
independent auditors and the Audit Committee of the Board of Directors of the Company have been
advised of all significant deficiencies, if any, in the design or operation of internal controls
which could adversely affect the Company’s ability to record, process, summarize and report
financial data. All known material weaknesses, if any, in internal controls have been identified
to the Company’s independent auditors. Since the date of the most recent evaluation of such
disclosure controls and procedures and internal controls, there have been no significant
13
changes in internal controls or in other factors that could significantly and adversely
affect internal controls. All “significant deficiencies” and “material weaknesses” (as such
terms are defined in PCAOB Auditing Standard No. 2) of the Company, if any, have been disclosed
in the Registration Statement and the Prospectus; the principal executive officers (or their
equivalents) and principal financial officers (or their equivalents) of the Company have made all
certifications required by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act”)
and any related rules and regulations promulgated by the Commission, and the statements contained
in each such certification are complete and correct. The Company, its Subsidiaries and the
Company’s directors and officers are each in compliance in all material respects with all
applicable effective provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the rules and regulations of the
Commission and the NASDAQ promulgated thereunder.
(gg) Finder’s Fees. Neither the Company nor any of its Subsidiaries has incurred any
liability for any finder’s fees or similar payments in connection with the transactions herein
contemplated, except as may otherwise exist with respect to CF&Co pursuant to this Agreement.
(hh) Labor Disputes. Neither the Company nor any of its Subsidiaries is engaged in
any unfair labor practice; except for matters which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, (i) there is no (A) unfair labor
practice complaint pending or, to the Company’s knowledge, threatened against the Company or its
Subsidiaries before the National Labor Relations Board, and no grievance or arbitration
proceeding arising out of or under collective bargaining agreements is pending or, to the
Company’s knowledge, threatened, (B) strike, labor dispute, slowdown or stoppage pending or, to
the Company’s knowledge, threatened against the Company or any of its Subsidiaries and (C) union
representation dispute currently existing concerning the employees of the Company or any of its
Subsidiaries, and (ii) to the Company’s knowledge, (A) no union organizing activities are
currently taking place concerning the employees of the Company or any of its Subsidiaries, and
(B) there has been no violation of any federal, state, local, or foreign law relating to
discrimination in the hiring, promotion or pay of employees or any applicable wage or hour laws
concerning the employees of the Company.
(ii) Investment Company Act. Neither the Company nor any of its Subsidiaries, after
giving effect to the offering and sale of the Placement Shares, will be (i) required to register
as an “investment company” or an entity “controlled” by an “investment company,” as such terms
are defined in the Investment Company Act of 1940, as amended (the “Investment Company
Act”), or (ii) a “business development company” (as defined in Section 2(a)(48) of the
Investment Company Act.
(jj) Casualty. Neither the Company nor, to the Company’s knowledge, any of its
Subsidiaries has sustained since the date of the last audited financial statements included in
the Registration Statement and the Prospectus any loss or interference with its respective
business from fire, explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree, in each case that,
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
(kk) Underwriter Agreements. The Company is not a party to any agreement with an
agent or underwriter for any other “at-the-market” or continuous equity transaction.
14
(ll) ERISA. The Company and its Subsidiaries are in compliance with all presently
applicable provisions of the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder (“ERISA”), except for
any noncompliance that, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. No “reportable event” (as defined in section 4043 of ERISA) for
which the Pension Benefit Guaranty Corporation has not waived the notice requirement has occurred
in the past three years with respect to any “pension plan” (as defined in ERISA) for which the
Company and its Subsidiaries would reasonably expect to have any liability. The Company and its
Subsidiaries have not incurred and do not reasonably expect to incur liability under (i) Title IV
of ERISA with respect to termination of, or withdrawal from, any “pension plan” or (ii) Sections
412 or 4971 of the Code. Each “pension plan” for which the Company or its Subsidiaries would
have any liability that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination or opinion letter to that effect and, to the Company’s
knowledge, no event has occurred since the date of such letter that could reasonably be expected
to result in the loss of such qualification.
(mm) CF&Co Purchases. The Company acknowledges and agrees that CF&Co has informed
the Company that CF&Co may, to the extent permitted under the Securities Act and the Exchange
Act, purchase and sell shares of Common Stock for its own account while this Agreement is in
effect, provided, that (i) no such purchase or sales shall take place while a Placement Notice is
in effect (except to the extent CF&Co may engage in sales of Placement Shares purchased or deemed
purchased from the Company as a “riskless principal” or in a similar capacity) and (ii) the
Company shall not be deemed to have authorized or consented to any such purchases or sales by
CF&Co.
(nn) No Improper Practices. (i) Neither the Company nor, to the Company’s
knowledge, its Subsidiaries, nor to the Company’s knowledge, any of their respective executive
officers has, in the past five years, made any unlawful contributions to any candidate for any
political office (or failed fully to disclose any contribution in violation of law) or made any
contribution or other payment to any official of, or candidate for, any federal, state,
municipal, or foreign office or other person charged with similar public or quasi-public duty in
violation of any law or of the character required to be disclosed in the Prospectus; (ii) no
relationship, direct or indirect, exists between or among the Company or, to the Company’s
knowledge, any Subsidiary or any affiliate of any of them, on the one hand, and the directors,
officers and stockholders of the Company or, to the Company’s knowledge, any Subsidiary, on the
other hand, that is required by the Securities Act to be described in the Registration Statement
and the Prospectus that is not so described; (iii) no relationship, direct or indirect, exists
between or among the Company or any Subsidiary or any affiliate of them, on the one hand, and the
directors, officers, stockholders or directors of the Company or, to the Company’s knowledge, any
Subsidiary, on the other hand, that is required by the rules of the FINRA to be described in the
Registration Statement and the Prospectus that is not so described; (iv) except as described in
the Prospectus, there are no material outstanding loans or advances or material guarantees of
indebtedness by the Company or, to the Company’s knowledge, any Subsidiary to or for the benefit
of any of their respective officers or directors or any of the members of the families of any of
them; (v) the Company has not offered, or caused any placement agent to offer, Common Stock to
any person with the intent to influence unlawfully (A) a customer or supplier of the Company or
any Subsidiary to alter the
15
customer’s or supplier’s level or type of business with the Company or any Subsidiary or (B)
a trade journalist or publication to write or publish favorable information about the Company or
any Subsidiary or any of their respective products or services, and, (vi) neither the Company nor
any Subsidiary nor, to the Company’s knowledge, any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary or received or retained
any funds in violation of any law, rule or regulation (including, without limitation, the Foreign
Corrupt Practices Act of 1977), which payment, receipt or retention of funds is of a character
required to be disclosed in the Registration Statement or the Prospectus.
(oo) Title to Property. Except as set forth in the Registration Statement and the
Prospectus, the Company and its Subsidiaries have good and marketable title to all property (real
and personal) described in the Registration Statement and the Prospectus as being owned by any of
them, free and clear of all material liens, claims, security interests or other encumbrances,
except to the extent such material liens, claims, security interests or other encumbrances are
disclosed in the Registration Statement and the Prospectus; all the property described in the
Registration Statement and the Prospectus as being held under lease by the Company or any
Subsidiary is held thereby under valid, subsisting and enforceable leases.
(pp) Insurance. The Company and its Subsidiaries maintain insurance covering their
respective properties, operations, personnel and businesses as the Company reasonably deems
adequate; such insurance insures against such losses and risks to an extent which the Company
reasonably believes is adequate and in accordance with customary industry practice to protect the
Company and its Subsidiaries and their respective businesses; all such insurance is fully in
force on the date hereof and will be fully in force at the time of purchase; neither the Company
nor its Subsidiaries has reason to believe that it will not be able to renew any such insurance
as and when such insurance expires.
(qq) Data Reliable and Accurate. All statistical or market-related data included
or incorporated by reference in the Registration Statement and the Prospectus are based on or
derived from sources that the Company believes to be reliable and accurate, and the Company has
obtained the written consent to the use of such data from such sources to the extent required.
(rr) NASDAQ: Registration. The Common Stock is registered pursuant to Section
12(b) or 12(g) of the Exchange Act and is accepted for quotation on the Exchange, and the Company
has taken no action designed to terminate the registration of the Common Stock under the Exchange
Act or delisting the Common Stock from the Exchange, nor except as disclosed in the Prospectus,
has the Company received any notification that the Commission or FINRA is contemplating
terminating such registration or listing. Except as disclosed in the Prospectus, the Company has
complied in all material respects with the applicable requirements of the Exchange for
maintenance of inclusion of the Common Stock thereon. The Company has filed a Notification of
Listing of Additional Shares with the Exchange with respect to the Placement Shares.
7. Covenants of the Company. The Company covenants and agrees with CF&Co that:
(a) Registration Statement Amendments; Payment of Fees. After the date of this
Agreement and during any period in which a Prospectus relating to any Placement Shares is
16
required to be delivered by CF&Co under the Securities Act with respect to a pending sale of
the Placement Shares (including in circumstances where such requirement may be satisfied pursuant
to Rule 172 under the Securities Act), (i) the Company will notify CF&Co promptly of the time
when any subsequent amendment to the Registration Statement, other than documents incorporated by
reference, has been filed with the Commission and/or has become effective or any subsequent
supplement to the Prospectus has been filed and any request by the Commission for any amendment
or supplement to the Registration Statement or Prospectus or for additional information, (ii) the
Company will prepare and file with the Commission, promptly upon CF&Co’s request, any amendments
or supplements to the Registration Statement or Prospectus that, in CF&Co’s reasonable opinion,
may be necessary or advisable in connection with the distribution of the Placement Shares by
CF&Co; provided, however, that the failure of CF&Co to make such request shall not relieve the
Company of any obligation or liability hereunder, or affect CF&Co’s right to rely on the
representations and warranties made by the Company in this Agreement, and the Company will not
file any amendment or supplement to the Registration Statement or Prospectus, other than
documents incorporated therein by reference, relating to the Placement Shares unless a copy
thereof has been submitted to CF&Co within a reasonable period of time before the filing and
CF&Co has not reasonably objected thereto; provided, however, (A) that the failure of CF&Co to
make such objection shall not relieve the Company of any obligation or liability hereunder, or
affect CF&Co’s right to rely on the representations and warranties made by the Company in this
Agreement, (B) that the Company has no obligation to provide CF&Co any advance copy of such
filing or to provide CF&Co an opportunity to object to such filing if such filing does not name
CF&Co; and (C) that CF&Co shall not object to any such filing if the Company obtains a written
opinion of counsel reasonably satisfactory to CF&Co that such filing is required under applicable
law) (iii) the Company will furnish to CF&Co at the time of filing thereof a copy of any document
that upon filing is deemed to be incorporated by reference into the Registration Statement or
Prospectus, except for those documents available via IDEA; and (iv) the Company will cause each
supplement to the Prospectus relating to the Placement Shares, other than documents incorporated
by reference, to be filed with the Commission as required pursuant to the applicable paragraph of
Rule 424(b) of the Securities Act (without reliance on Rule 424(b)(8) of the Securities Act).
(b) Notice of Commission Stop Orders. During any period in which a Prospectus
relating to any Placement Shares is required to be delivered by CF&Co under the Securities Act
with respect to a pending sale of Placement Shares, the Company will advise CF&Co, promptly after
it receives notice or obtains knowledge thereof, of the issuance or threatened issuance by the
Commission of any stop order suspending the effectiveness of the Registration Statement or any
other order preventing or suspending the use of the Prospectus, of the suspension of the
qualification of the Placement Shares for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose or any examination pursuant to
Section 8(e) of the Securities Act, or if the Company becomes the subject of a proceeding under
Section 8A of the Securities Act in connection with the offering of the Placement Shares; and the
Company will promptly use its commercially reasonable efforts to prevent the issuance of any stop
or other order or to obtain its withdrawal if such a stop or other order should be issued.
(c) Delivery of Prospectus; Subsequent Changes. During any period in which a
Prospectus relating to the Placement Shares is required to be delivered by CF&Co under the
17
Securities Act with respect to a pending sale of the Placement Shares (including in
circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities
Act), the Company will comply with all requirements imposed upon it by the Securities Act, as
from time to time in force, and to file on or before their respective due dates all reports and
any definitive proxy or information statements required to be filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the
Exchange Act. If during such period any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or supplement the
Registration Statement or Prospectus to comply with the Securities Act, the Company will promptly
notify CF&Co to suspend the offering of Placement Shares during such period and the Company will
promptly amend or supplement the Registration Statement or Prospectus (at the expense of the
Company) so as to correct such statement or omission or effect such compliance.
(d) Listing of Placement Shares. During any period in which the Prospectus relating
to the Placement Shares is required to be delivered by CF&Co under the Securities Act with
respect to a pending sale of the Placement Shares (including in circumstances where such
requirement may be satisfied pursuant to Rule 172 under the Securities Act), the Company will use
its commercially reasonable efforts to cause the Placement Shares to be listed on the Exchange
and to qualify the Placement Shares for sale under the securities laws of such jurisdictions as
CF&Co reasonably designates and to continue such qualifications in effect so long as required for
the distribution of the Placement Shares; provided, however, that the Company shall not be
required in connection therewith to qualify as a foreign entity or dealer in securities or file a
general consent to service of process in any jurisdiction.
(e) Delivery of Registration Statement and Prospectus. The Company will furnish to
CF&Co and its counsel (at the expense of the Company) copies of the Registration Statement, the
Prospectus (including all documents incorporated by reference therein) and all amendments and
supplements to the Registration Statement or Prospectus that are filed with the Commission during
any period in which a Prospectus relating to the Placement Shares is required to be delivered
under the Securities Act (including all documents filed with the Commission during such period
that are deemed to be incorporated by reference therein), in each case as soon as reasonably
practicable and in such quantities as CF&Co may from time to time reasonably request and, at
CF&Co’s request, will also furnish copies of the Prospectus to each exchange or market on which
sales of the Placement Shares may be made. The copies of the Registration Statement and the
Prospectus and any supplements or amendments thereto furnished to CF&Co will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to IDEA, except to
the extent permitted by Regulation S-T. Notwithstanding the foregoing, the Company will not be
required to furnish any document (other than the Prospectus) to CF&Co to the extent such document
is available on IDEA.
(f) Earnings Statement. The Company will make generally available to its security
holders as soon as practicable, but in any event not later than 15 months after the end of the
Company’s current fiscal quarter, an earnings statement covering a 12-month period that satisfies
the provisions of Section 11(a) and Rule 158 of the Securities Act. “Earnings statement” and
“make generally available” will have the meanings contained in Rule 158 under the Securities Act.
18
(g) Expenses.
| (i) | The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, in accordance with the provisions of Section 11 hereunder, will pay all expenses incident to the performance of the Company’s obligations hereunder, which the parties acknowledge include expenses relating to: (i) the preparation, printing and filing of the Registration Statement and each amendment and supplement thereto, of each Prospectus and of each amendment and supplement thereto, and of this Agreement, (ii) the preparation, issuance and delivery of the Placement Shares, (iii) the printing and delivery to CF&Co of copies of the Prospectus and any amendments and supplements thereto, (iv) the fees and expenses incurred in connection with the listing or qualification of the Placement Shares for trading on the Exchange, and (v) the filing fees and expenses, if any, of the Commission and FINRA. | ||
| (ii) | CF&Co will pay all expenses incident to the performance of its obligations hereunder, including attorney’s fees, consultant fees, travel and lodging expenses and any other incidental fees and expenses incurred by CF&Co. Notwithstanding the foregoing, the Company will, within 30 days from the delivery of an invoice, reimburse CF&Co for up to $50,000 of such out-of-pocket expenses. |
(h) Use of Proceeds. The Company will use the Net Proceeds as described in the
Prospectus in the section entitled “Use of Proceeds.”
(i) Notice of Other Sales. During either the pendency of any Placement Notice given
hereunder, or any period in which the Prospectus relating to the Placement Shares is required to
be delivered by CF&Co, the Company shall provide CF&Co notice as promptly as reasonably possible
before it offers to sell, contracts to sell, sells, grants any option to sell or otherwise
disposes of any shares of Common Stock (other than Placement Shares offered pursuant to the
provisions of this Agreement) or securities convertible into or exchangeable for Common Stock,
warrants or any rights to purchase or acquire Common Stock; provided, that such notice shall not
be required in connection with the (i) issuance, grant or sale of Common Stock, options to
purchase shares of Common Stock or Common Stock issuable upon the exercise of options or other
equity awards pursuant to any employee or director stock option or benefits plan or stock
ownership plan or issuances permitted by FINRA (ii) the issuance or sale of Common Stock pursuant
to any dividend reinvestment plan that the Company may adopt from time to time or (iii) the
issuance of Common Stock upon the exercise of any currently outstanding warrants, options or
other rights in effect or outstanding and disclosed in filings by the Company available on ▇▇▇▇▇.
(j) Change of Circumstances. The Company will, at any time during the pendency of a
Placement Notice, advise CF&Co promptly after it shall have received notice or obtained knowledge
thereof, of any information or fact that would alter or affect in any material respect any
opinion, certificate, letter or other document required to be provided to CF&Co pursuant to this
Agreement.
19
(k) Due Diligence Cooperation. The Company will cooperate with any reasonable due
diligence review conducted by CF&Co or its agents in connection with the transactions
contemplated hereby, including, without limitation, providing information and making available
documents and senior corporate officers, during regular business hours and at the Company’s
principal offices, as CF&Co may reasonably request.
(l) Required Filings Relating to Placement of Placement Shares. The Company agrees
that on such dates as the Securities Act shall require, the Company will (i) file a prospectus
supplement with the Commission under the applicable paragraph of Rule 424(b) under the Securities
Act (each and every filing date under Rule 424(b), a “Filing Date”), which prospectus
supplement will set forth, within the relevant period, the amount of Placement Shares sold
through CF&Co, the Net Proceeds to the Company and the compensation payable by the Company to
CF&Co with respect to such Placement Shares, and (ii) deliver such number of copies of each such
prospectus supplement to each exchange or market on which such sales were effected as may be
required by the rules or regulations of such exchange or market.
(m) Representation Dates; Certificate. Three Trading Days prior to the First
Delivery Date and each time the Company (i) files the Prospectus relating to the Placement Shares
or amends or supplements the Registration Statement or the Prospectus relating to the Placement
Shares by means of a post-effective amendment, sticker, or supplement but not by means of
incorporation of documents by reference into the Registration Statement or the Prospectus
relating to the Placement Shares; (ii) files an annual report on Form 10-K under the Exchange
Act; (iii) files its quarterly reports on Form 10-Q under the Exchange Act; or (iv) files a
report on Form 8-K containing amended financial information (other than an earnings release, to
“furnish” information pursuant to Items 2.02 or 7.01 of Form 8-K or to provide disclosure
pursuant to Item 8.01 of Form 8-K relating to the reclassifications of certain properties as
discontinued operations in accordance with Statement of Financial Accounting Standards No. 144)
under the Exchange Act (each date of filing of one or more of the documents referred to in
clauses (i) through (iv) shall be a “Representation Date”); the Company shall furnish
CF&Co with a certificate, in the form attached hereto as Exhibit 7(m) within three (3)
Trading Days of any Representation Date. The requirement to provide a certificate under this
Section 7(m) shall be waived for any Representation Date occurring at a time at which no
Placement Notice is pending, which waiver shall continue until the earlier to occur of the date
the Company delivers a Placement Notice hereunder (which for such calendar quarter shall be
considered a Representation Date) and the next occurring Representation Date; provided, however,
that such waiver shall not apply for any Representation Date on which the Company files its
annual report on Form 10-K. Notwithstanding the foregoing, if the Company subsequently decides
to sell Placement Shares following a Representation Date when the Company relied on such waiver
and did not provide CF&Co with a certificate under this Section 7(m), then before the
Company delivers the Placement Notice or CF&Co sells any Placement Shares, the Company shall
provide CF&Co with a certificate, in the form attached hereto as Exhibit 7(m), dated the
date of the Placement Notice.
(n) Legal Opinion. On the date of the first Placement Notice given hereunder, the
Company shall cause to be furnished to CF&Co a written opinion dated as of the date of such
Placement Notice of ▇▇▇▇▇▇▇ Procter LLP (the “Company Counsel”), in a form substantially
20
similar to the form attached hereto as Exhibit 7(n)(1). Within three (3) Trading Days of
each subsequent Representation Date with respect to which the Company is obligated to deliver a
certificate in the form attached hereto as Exhibit 7(n) for which no waiver is applicable, the
Company shall cause to be furnished to CF&Co a written opinion of Company Counsel in a form
substantially similar to the form attached hereto as Exhibit 7(n)(2), modified, as
necessary, to relate to the Registration Statement and the Prospectus as then amended or
supplemented; provided, however, that in lieu of such opinion, Company Counsel
may furnish CF&Co with a letter to the effect that CF&Co may rely on a prior opinion delivered
under this Section 7(n) to the same extent as if it were dated the date of such letter
(except that statements in such prior opinion shall be deemed to relate to the Registration
Statement and the Prospectus as amended or supplemented at such Representation Date).
(o) Comfort Letter. Three Trading Days prior to the First Delivery Date and within
three (3) Trading Days of each Representation Date with respect to which the Company is obligated
to deliver a certificate in the form attached hereto as Exhibit 7(o) for which no waiver
is applicable, the Company shall cause its independent accountants (and any other independent
accountants whose report is included in the Registration Statement or the Prospectus), to furnish
CF&Co letters (the “Comfort Letters”) in form and substance satisfactory to CF&Co, (i)
confirming that they are an independent registered public accounting firm within the meaning of
the Securities Act, the Exchange Act, and the PCAOB, (ii) stating, as of such date, the
conclusions and findings of such firm with respect to the financial information and other matters
ordinarily covered by accountants’ “comfort letters” to underwriters in connection with
registered public offerings (the first such letter, the “Initial Comfort Letter”) and
(iii) updating the Initial Comfort Letter with any information that would have been included in
the Initial Comfort Letter had it been given on such date and modified as necessary to relate to
the Registration Statement and the Prospectus, as amended and supplemented to the date of such
letter.
(p) Market Activities. The Company will not, directly or indirectly take any action
designed to cause or result in, or that constitutes or might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Placement Shares or (ii) sell, bid for, or purchase the
Placement Shares to be issued and sold pursuant to this Agreement, or pay anyone any compensation
for soliciting purchases of the Placement Shares to be issued and sold pursuant to this Agreement
other than CF&Co.
(q) Investment Company Act. The Company will conduct its affairs in such a manner
so as to reasonably ensure that neither it nor any Subsidiary will be or become, at any time
prior to the termination of this Agreement, an “investment company,” as such term is defined in
the Investment Company Act, assuming no change in the Commission’s current interpretation as to
entities that are not considered an investment company.
8. Conditions to CF&Co’s Obligations. The obligations of CF&Co hereunder with respect
to a Placement Notice will be subject to the continuing accuracy and completeness of the
representations and warranties made by the Company herein, to the due performance by the Company of
its obligations hereunder, to the completion by CF&Co of a due diligence review satisfactory to
CF&Co in its reasonable judgment, and to the continuing satisfaction (or waiver by CF&Co in its
sole discretion) of the following additional conditions:
21
(a) Registration Statement Effective. The Registration Statement shall have become
effective and shall be available for the sale of all Placement Shares contemplated to be issued
by any Placement Notice.
(b) No Material Notices. None of the following events shall have occurred and be
continuing: (i) receipt by the Company of any request for additional information from the
Commission or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement, the response to which would require any
post-effective amendments or supplements to the Registration Statement or the Prospectus; (ii)
the issuance by the Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of the Placement
Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the occurrence of any event that makes any material statement made in the
Registration Statement or the Prospectus or any material document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires the making of
any changes in the Registration Statement, related Prospectus or documents so that, in the case
of the Registration Statement, it will not contain any materially 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 not misleading and, that in the case of the Prospectus, it will not contain
any materially 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
under which they were made, not misleading.
(c) Material Changes. Except as contemplated in the Prospectus, or disclosed in the
Company’s reports filed with the Commission, there shall not have been any material adverse
change, on a consolidated basis, in the authorized capital stock of the Company or any Material
Adverse Effect, or any development that could reasonably be expected to cause a Material Adverse
Effect, the effect of which, in the reasonable judgment of CF&Co (without relieving the Company
of any obligation or liability it may otherwise have), is so material as to make it impracticable
or inadvisable to proceed with the offering of the Placement Shares on the terms and in the
manner contemplated in the Prospectus.
(d) Legal Opinion. CF&Co shall have received the opinion of Company Counsel
required to be delivered pursuant to Section 7(n) on or before the date on which such
delivery of such opinion is required pursuant to Section 7(n).
(e) Comfort Letter. CF&Co shall have received the Comfort Letter required to be
delivered pursuant to Section 7(o) on or before the date on which such delivery of such
opinion is required pursuant to Section 7(o).
(f) Representation Certificate. CF&Co shall have received the certificate required
to be delivered pursuant to Section 7(m) on or before the date on which delivery of such
certificate is required pursuant to Section 7(m).
(g) No Suspension. Trading in the Common Stock shall not have been suspended on the
Exchange.
22
(h) Other Materials. On each date on which the Company is required to deliver a
certificate pursuant to Section 7(m), the Company shall use its commercially reasonable
efforts to furnish to CF&Co such appropriate further information, certificates and documents as
CF&Co may reasonably request. All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof. The Company will furnish CF&Co with such conformed
copies of such opinions, certificates, letters and other documents as CF&Co shall reasonably
request.
(i) Securities Act Filings Made. All filings with the Commission required by Rule
424 under the Securities Act to have been filed prior to the issuance of any Placement Notice
hereunder shall have been made within the applicable time period prescribed for such filing by
Rule 424.
(j) Approval for Listing. The Placement Shares shall either have been (i) approved
for listing on the Exchange, subject only to notice of issuance, or (ii) the Company shall have
filed an application for listing of the Placement Shares on the Exchange at, or prior to, the
issuance of any Placement Notice.
(k) No Termination Event. There shall not have occurred any event that would permit
CF&Co to terminate this Agreement pursuant to Section 11(a).
9. Indemnification and Contribution.
(a) Company Indemnification. The Company agrees to indemnify and hold harmless
CF&Co, the directors, officers, partners, employees and agents of CF&Co and each person, if any,
who (i) controls CF&Co within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, or (ii) is controlled by or is under common control with CF&Co (a “CF&Co
Affiliate”) from and against any and all losses, claims, liabilities, expenses and damages
(including, but not limited to, any and all reasonable investigative, legal and other expenses
incurred in connection with, and any and all amounts paid in settlement (in accordance with
Section 9(c)) of, any action, suit or proceeding between any of the indemnified parties
and any indemnifying parties or between any indemnified party and any third party, or otherwise,
or any claim asserted), as and when incurred, to which CF&Co, or any such person, may become
subject under the Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based, directly or indirectly, on any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or the Prospectus, or
any amendments thereto (including the information deemed to be a part of the Registration
Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and
430B, if applicable) or the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; provided, however,
that this indemnity agreement shall not apply to the extent that such loss, claim, liability,
expense or damage arises from or is caused directly or indirectly by an untrue statement or
omission or alleged untrue statement or omission made in reliance on and in conformity with
information furnished in writing to the Company by or on behalf of CF&Co expressly for inclusion
in the Registration Statement or Prospectus. This indemnity agreement will be in addition to any
liability that the Company might otherwise have.
23
(b) CF&Co Indemnification. CF&Co agrees to indemnify and hold harmless the Company
and its directors and each officer of the Company who signed the Registration Statement, and each
person, if any, who (i) controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act or (ii) is controlled by or is under common control with
the Company (a “Company Affiliate”) against any and all losses, liabilities, claims,
damages and expenses to which the Company, or any such person, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, as and when incurred, but only insofar as such loss, liability, claim, damage
or expense arises from or is caused directly or indirectly by an untrue statement or omission or
alleged untrue statement or omission made in reliance on and in conformity with information
furnished in writing to the Company by or on behalf of CF&Co expressly for inclusion in the
Registration Statement or Prospectus.
(c) Procedure. Any party that proposes to assert the right to be indemnified under
this Section 9 will, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim is to be made against an indemnifying party or
parties under this Section 9, notify each such indemnifying party of the commencement of
such action, enclosing a copy of all papers served, but the omission so to notify such
indemnifying party will not relieve the indemnifying party from (i) any liability that it might
have to any indemnified party otherwise than under this Section 9 and (ii) any liability
that it may have to any indemnified party under the foregoing provision of this Section 9
unless, and only to the extent that, such omission results in the forfeiture of substantive
rights or defenses by the indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by delivering written
notice to the indemnified party promptly after receiving notice of the commencement of the action
from the indemnified party, jointly with any other indemnifying party similarly notified, to
assume the defense of the action, with counsel reasonably satisfactory to the indemnified party,
and after notice from the indemnifying party to the indemnified party of its election to assume
the defense, the indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below. The indemnified party will have the right to employ its
own counsel in any such action, but the fees, expenses and other charges of such counsel will be
at the expense of such indemnified party unless (1) the employment of counsel by the indemnified
party has been authorized in writing by the indemnifying party, (2) the indemnified party has
reasonably concluded (based on the written advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists (based on the
written advice of counsel to the indemnified party) between the indemnified party and the
indemnifying party (in which case the indemnifying party will not have the right to direct the
defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not
in fact employed counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All
24
such fees, disbursements and other charges will be reimbursed by the indemnifying party
promptly as they are incurred. An indemnifying party will not, in any event, be liable for any
settlement of any action or claim effected without its written consent. No indemnifying party
shall, without the prior written consent of each indemnified party, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated by this Section 9 (whether or not any indemnified
party is a party thereto), unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising or that may arise out
of such claim, action or proceeding.
(d) Contribution. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing paragraphs of this
Section 9 is applicable in accordance with its terms but for any reason is held to be
unavailable from the Company or CF&Co, the Company and CF&Co will contribute to the total losses,
claims, liabilities, expenses and damages (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received by the Company
from persons other than CF&Co, if any), to which the Company and CF&Co may be subject in such
proportion as shall be appropriate to reflect the relative benefits received by the Company, on
the one hand, and CF&Co, on the other. The relative benefits received by the Company on the one
hand and CF&Co on the other hand shall be deemed to be in the same proportion as the total net
proceeds from the sale of the Placement Shares (before deducting expenses) received by the
Company bear to the total compensation received by CF&Co from the sale of Placement Shares on
behalf of the Company. If, but only if, the allocation provided by the foregoing sentence is not
permitted by applicable law, the allocation of contribution shall be made in such proportion as
is appropriate to reflect not only the relative benefits referred to in the foregoing sentence
but also the relative fault of the Company, on the one hand, and CF&Co, on the other, with
respect to the statements or omission that resulted in such loss, claim, liability, expense or
damage, or action in respect thereof, as well as any other relevant equitable considerations with
respect to such offering. Such relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company, on the one
hand, or CF&Co, on the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission. The Company and
CF&Co agree that it would not be just and equitable if contributions pursuant to this Section
9(d) were to be determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, liability, expense, or damage, or
action in respect thereof, referred to above in this Section 9(d) shall be deemed to
include, for the purpose of this Section 9(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending any such action
or claim to the extent consistent with Section 9(c) hereof. Notwithstanding the
foregoing provisions of this Section 9(d), CF&Co shall not be required to contribute any
amount in excess of the commissions received by it under this Agreement and no person found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For
25
purposes of this Section 9(d), any person who controls a party to this Agreement
within the meaning of the Securities Act, and any officers, directors, partners, employees or
agents of CF&Co, will have the same rights to contribution as that party, and each trustee of the
Company and each officer of the Company who signed the Registration Statement will have the same
rights to contribution as the Company, subject in each case to the provisions hereof. Any party
entitled to contribution, promptly after receipt of notice of commencement of any action against
such party in respect of which a claim for contribution may be made under this Section
9(d), will notify any such party or parties from whom contribution may be sought, but the
omission to so notify will not relieve that party or parties from whom contribution may be sought
from any other obligation it or they may have under this Section 9(d) except to the
extent that the failure to so notify such other party materially prejudiced the substantive
rights or defenses of the party from whom contribution is sought. Except for a settlement entered
into pursuant to the last sentence of Section 9(c) hereof, no party will be liable for
contribution with respect to any action or claim settled without its written consent if such
consent is required pursuant to Section 9(c) hereof.
10. Representations and Agreements to Survive Delivery. All representations and
warranties of the Company herein or in certificates delivered pursuant hereto shall survive, as of
their respective dates, regardless of (i) any investigation made by or on behalf of CF&Co, any
controlling persons, or the Company (or any of their respective officers, directors or controlling
persons), (ii) delivery and acceptance of the Placement Shares and payment therefor or (iii) any
termination of this Agreement.
11. Termination.
(a) CF&Co shall have the right by giving notice as hereinafter specified at any time to
terminate this Agreement if (i) any Material Adverse Effect, or any development that has actually
occurred and that is reasonably expected to cause a Material Adverse Effect has occurred that, in
the reasonable judgment of CF&Co, may materially impair the ability of CF&Co to sell the
Placement Shares hereunder, (ii) the Company shall have failed, refused or been unable to perform
any agreement on its part to be performed hereunder; provided, however, in the case of any
failure of the Company to deliver (or cause another person to deliver) any certification,
opinion, or letter required under Sections 7(m), 7(n), or 7(o),
CF&Co’s right to terminate shall not arise unless such failure to deliver (or cause to be
delivered) continues for more than thirty (30) days from the date such delivery was required;
(iii) any other condition of CF&Co’s obligations hereunder is not fulfilled; or (iv) any
suspension or limitation of trading in the Placement Shares or in securities generally on the
Exchange shall have occurred. Any such termination shall be without liability of any party to
any other party except that the provisions of Section 7(g) (Expenses), Section 9
(Indemnification), Section 10 (Survival of Representations), Section 16
(Applicable Law; Consent to Jurisdiction) and Section 17 (Waiver of Jury Trial) hereof
shall remain in full force and effect notwithstanding such termination. If CF&Co elects to
terminate this Agreement as provided in this Section 11(a), CF&Co shall provide the
required notice as specified in Section 12 (Notices).
(b) The Company shall have the right, by giving ten (10) days notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time after the date of this
Agreement. Any such termination shall be without liability of any party to any other party
26
except that the provisions of Section 7(g), Section 9, Section 10,
Section 16 and Section 17 hereof shall remain in full force and effect
notwithstanding such termination.
(c) CF&Co shall have the right, by giving ten (10) days notice as hereinafter specified to
terminate this Agreement in its sole discretion at any time after the date of this Agreement.
Any such termination shall be without liability of any party to any other party except that the
provisions of Section 7(g), Section 9, Section 10, Section 16 and
Section 17 hereof shall remain in full force and effect notwithstanding such termination.
(d) Unless earlier terminated pursuant to this Section 11, this Agreement shall
automatically terminate upon the issuance and sale of all of the Placement Shares through CF&Co
on the terms and subject to the conditions set forth herein; provided that the provisions of
Section 7(g), Section 9, Section 10, Section 16 and Section
17 hereof shall remain in full force and effect notwithstanding such termination.
(e) This Agreement shall remain in full force and effect unless terminated pursuant to
Sections 11(a), (b), (c), or (d) above or otherwise by mutual agreement
of the parties; provided, however, that any such termination by mutual agreement shall in all
cases be deemed to provide that Section 7(g), Section 9, Section 10,
Section 16 and Section 17 shall remain in full force and effect.
(f) Any termination of this Agreement shall be effective on the date specified in such
notice of termination; provided, however, that such termination shall not be effective until the
close of business on the date of receipt of such notice by CF&Co or the Company, as the case may
be. If such termination shall occur prior to the Settlement Date for any sale of Placement
Shares, such Placement Shares shall settle in accordance with the provisions of this Agreement.
12. Notices. All notices or other communications required or permitted to be given by
any party to any other party pursuant to the terms of this Agreement shall be in writing, unless
otherwise specified in this Agreement, and if sent to CF&Co, shall be delivered to Cantor
▇▇▇▇▇▇▇▇▇▇ & Co., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, Attention:
Capital Markets/▇▇▇▇ ▇▇▇▇▇, with copies to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel, at the same address,
and DLA Piper LLP (US), ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇)
▇▇▇-▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇; or if sent to the Company, shall be delivered to Avanir
Pharmaceuticals, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇)
▇▇▇-▇▇▇▇, Attention: Chief Financial Officer, with a copy to ▇▇▇▇▇▇▇ Procter LLP, Three ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇ ▇.
▇▇▇▇. Each party to this Agreement may change such address for notices by sending to the parties to
this Agreement written notice of a new address for such purpose. Each such notice or other
communication shall be deemed given (i) when delivered personally or by verifiable facsimile
transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business
Day or, if such day is not a Business Day, on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to a nationally-recognized overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid). For purposes of this Agreement, “Business Day” shall
mean any day on which the Exchange and commercial banks in the City of New York are open for
business.
27
13. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the Company and CF&Co and their respective successors and the affiliates, controlling
persons, officers and directors referred to in Section 9 hereof. References to any of the
parties contained in this Agreement shall be deemed to include the successors and permitted assigns
of such party. Nothing in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement. Neither party may assign its rights or obligations under this Agreement
without the prior written consent of the other party.
14. Adjustments for Stock Splits. The parties acknowledge and agree that all
share-related numbers contained in this Agreement shall be adjusted to take into account any stock
split, stock dividend or similar event effected with respect to the Placement Shares.
15. Entire Agreement; Amendment; Severability. This Agreement (including all
schedules and exhibits attached hereto and placement notices issued pursuant hereto) constitutes
the entire agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, among the parties hereto with regard to the subject matter
hereof. Neither this Agreement nor any term hereof may be amended except pursuant to a written
instrument executed by the Company and CF&Co. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held invalid, illegal or
unenforceable as written by a court of competent jurisdiction, then such provision shall be given
full force and effect to the fullest possible extent that it is valid, legal and enforceable, and
the remainder of the terms and provisions herein shall be construed as if such invalid, illegal or
unenforceable term or provision was not contained herein, but only to the extent that giving effect
to such provision and the remainder of the terms and provisions hereof shall be in accordance with
the intent of the parties as reflected in this Agreement.
16. Applicable Law; Consent to Jurisdiction. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York without regard to the
principles of conflicts of laws. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan,
for the adjudication of any dispute hereunder or in connection with any transaction contemplated
hereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
(certified or registered mail, return receipt requested) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law.
17. Waiver of Jury Trial. The Company and CF&Co each hereby irrevocably waives any
right it may have to a trial by jury in respect of any claim based upon or arising out of this
agreement or any transaction contemplated hereby.
28
18. Absence of Fiduciary Relationship. The Company acknowledges and agrees that:
(a) CF&Co has been retained solely to act as underwriter in connection with the sale of the
Placement Shares and that no fiduciary, advisory or agency relationship between the Company and
CF&Co has been created in respect of any of the transactions contemplated by this Agreement,
irrespective of whether CF&Co has advised or is advising the Company on other matters;
(b) the Company is capable of evaluating and understanding and understands and accepts the
terms, risks and conditions of the transactions contemplated by this Agreement;
(c) the Company has been advised that CF&Co and its affiliates are engaged in a broad range
of transactions which may involve interests that differ from those of the Company and that CF&Co
has no obligation to disclose such interests and transactions to the Company by virtue of any
fiduciary, advisory or agency relationship; and
(d) the Company waives, to the fullest extent permitted by law, any claims it may have
against CF&Co, for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that
CF&Co shall have no liability (whether direct or indirect) to the Company in respect to such
fiduciary claim or to any person asserting a fiduciary duty claim on behalf of or in right of the
Company, including shareholders, partners, employees or creditors of the Company.
19. Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument. Delivery of an executed Agreement by one party to the other may be made by facsimile
transmission.
20. Definitions. As used in this Agreement, the following terms have the respective
meanings set forth below:
(a) “Applicable Time” means the date of this Agreement, each Representation Date,
the date on which a Placement Notice is given, any date on which Placement Shares are sold
hereunder, or such other time as agreed to by the Company and CF&Co.
(b) “GAAP” means generally accepted accounting principles, as consistently applied
in the United States.
[Remainder of Page Intentionally Blank]
29
If the foregoing correctly sets forth the understanding between the Company and CF&Co, please
so indicate in the space provided below for that purpose, whereupon this letter shall constitute a
binding agreement between the Company and CF&Co.
| Very truly yours, AVANIR PHARMACEUTICALS, INC. |
||||
| By: | /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |||
| Title: | Vice President, Finance | |||
ACCEPTED as of the date first-above written:
| CANTOR ▇▇▇▇▇▇▇▇▇▇ & CO. |
||||
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||
| Title: | Managing Director | |||
SCHEDULE 1
FORM OF PLACEMENT NOTICE
From:
|
[ ] | |
Cc:
|
[ ] | |
To:
|
[ ] | |
Subject:
|
Controlled Equity Offering—Placement Notice |
Gentlemen:
Pursuant to the terms and subject to the conditions contained in the Controlled Equity
OfferingSM Sales Agreement between Avanir Pharmaceuticals, Inc. (the “Company”)
and Cantor ▇▇▇▇▇▇▇▇▇▇ & Co.
(“CF&Co”) dated July 30, 2009 (the “Agreement”), I
hereby request on behalf of the Company that CF&Co sell up to [ ] shares of the Company’s Common
Stock, par value $0.0001 per share, at a minimum market price of $ per share.
SCHEDULE 2
CANTOR ▇▇▇▇▇▇▇▇▇▇ & CO.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
SCHEDULE 3
COMPENSATION
CF&Co shall be paid compensation equal to four percent (4%) of the first $10,000,000 in gross
proceeds from the sales of the Placement Shares and then a commission of three percent (3%) of the
gross proceeds above that amount.
Exhibit 7(n)(1)
Exhibit 7(n)(2)
Exhibit 7(o)
Exhibit 7(m)
OFFICER CERTIFICATE
The undersigned, the duly qualified and elected , of AVANIR PHARMACEUTICALS,
INC. (“Company”), a Delaware corporation, does hereby certify in such capacity and on
behalf of the Company, pursuant to Section 7(m) of the
Sales Agreement dated July 30, 2009
(the “Sales Agreement”) between the Company and Cantor ▇▇▇▇▇▇▇▇▇▇ & Co., that to the best
of the knowledge of the undersigned.
(i) The representations and warranties of the Company in Section 6 of the Sales
Agreement (A) to the extent such representations and warranties are subject to qualifications and
exceptions contained therein relation to materiality or Material Adverse Effect, are true and
correct on and as of the date hereof, except for those representations and warranties that speak
solely as of a specific date and which were true and correct as of such date, with the same force
and effect as if expressly made on and as of the date hereof and (B) to the extent such
representations and warranties are not subject to any qualifications or exceptions, are true and
correct in all material respects as of the date hereof as if made on and as of the date hereof
except for those representations and warranties that speak solely as of a specific date and which
were true and correct as of such date, with the same force and effect as if expressly made on and
as of the date hereof; and
(ii) The Company has complied with all agreements and satisfied all conditions on its part to
be performed or satisfied pursuant to the Sales Agreement at or prior to the date hereof.
| By: | ||||
| Name: | ||||
| Title: | ||||
Date: