_________ Shares of Common Stock
RESPONSE GENETICS, INC.
UNDERWRITING AGREEMENT
June [ ], 2007
MAXIM GROUP LLC
405 Lexington Avenue
New York, NY 10174
As Representative of the Underwriters
named on Schedule A hereto
Ladies and Gentlemen:
Response Genetics, Inc., a corporation organized and existing under the laws of Delaware (the “Company”), confirms its agreement, subject to the terms and conditions set forth herein, with each of the underwriters listed on Exhibit A hereto (collectively, the “Underwriters”), for whom Maxim Group LLC is acting as representative (in such capacity, the “Representative”), to sell and issue to the Underwriters an aggregate of _______ shares (the “Firm Shares”) of its common stock, $0.01 par value per share (the “Common Stock”). In addition, the Company shall grant to the Underwriters, upon the terms and conditions set forth in Section 2 hereof, an option to purchase up to an aggregate additional amount of _________ shares of Common Stock, representing up to 15% of the Firm Shares (the “Additional Shares”). The Firm Shares and any Additional Shares purchased by the Underwriters are referred to herein as the “Shares.”
In addition, the Company shall, at the Closing (as defined herein) issue to the Representative a warrant (the “Representative’s Warrant”) to purchase up to ________ shares of Common Stock (5% of the number of Firm Shares sold in the Offering). The Shares and the Representative’s Warrant are more fully described in the Registration Statement and Prospectus referred to below. The offering and sale of the Shares contemplated by this underwriting agreement (this “Agreement”) is referred to herein as the “Offering.”
1. Representations and Warranties of the Company. The Company represents, warrants and covenants to, and agrees with, each of the Underwriters that, as of the date hereof and as of the Closing Date and each Additional Closing Date:
(a) (i) The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form SB-2 (Registration No. 333-139534), and amendments thereto, and related preliminary prospectuses for the registration under the Securities Act of 1933, as amended (the “Securities Act”), of the Shares, which registration statement, as so amended (including post-effective amendments, if any), has been declared effective by the Commission and copies of which have heretofore been delivered to the Underwriters. Promptly after execution and delivery of this Agreement, the Company will prepare and file a prospectus in accordance with the provisions of Rule 430A (“Rule 430A”) of the rules and regulations of the Commission (the “Rules and Regulations”) and paragraph (b) of Rule 424 (“Rule 424(b)”) of the Regulations. The information included in such prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective pursuant to paragraph (b) of Rule 430A is referred to as “Rule 430A Information.” Each prospectus used before such registration statement became effective, and any prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is referred to herein as a “Preliminary Prospectus.” Such registration statement, including the amendments thereto, the exhibits and any schedules thereto, at the time it became effective, and including the Rule 430A Information, is herein called the “Registration Statement.”
Maxim Group LLC
June __, 2007
Page 2 of 42
Page 2 of 42
(ii) The Preliminary Prospectus dated May 3, 2007, that was included in the Registration Statement at the Time of Sale is referred to herein as the “Sale Preliminary Prospectus”, except that with respect to any revised prospectus (including: (A) the Preliminary Prospectus (the “May 31 Prospectus”) included in the Company’s Amendment No. 3 to the Registration Statement, dated May 31, 2007 (“Amendment No. 3”) or (B) the Preliminary Prospectus (the “June 4 Prospectus”) included in the Company’s Amendment No. 4 to the Registration Statement, dated June 4, 2007 (“Amendment No. 4”)) or any prospectus supplement (including the Company’s free writing prospectus, dated May 31, 2007 (the “Permitted FWP”) or any other revised prospectus or prospectus supplement provided to the Underwriters by the Company for use in connection with the Offering which differs from the May 3, 2007 Sale Preliminary Prospectus (whether or not such revised prospectus or prospectus supplement is required to be filed by the Company pursuant to Rule 424(b)), the terms “Sale Preliminary Prospectus” and “Prospectus” as used herein shall also refer to and include Amendment No. 3, Amendment No. 4, the May 31 Prospectus, the June 4 Prospectus, the Permitted FWP or such revised prospectus or prospectus supplement, as the case may be, from and after the time it is first provided to the Underwriters for such use. For purposes of this Agreement and the Securities Act, “Time of Sale”, means 4:30 p.m., New York City time, on the date of this Agreement. The final prospectus in the form first furnished to the Underwriters for use in connection with the offering of the Securities is referred to herein as the “Prospectus.”
(iii) If the Company has filed or is required pursuant to the terms hereof to file a registration statement pursuant to Rule 462(b) under the Securities Act registering additional shares of Common Stock (a “Rule 462(b) Registration Statement”), then, unless otherwise specified, any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462(b) Registration Statement. All of the Shares have been registered under the Securities Act pursuant to the Registration Statement or, if any Rule 462(b) Registration Statement is filed, will be duly registered under the Securities Act with the filing of such Rule 462(b) Registration Statement.
(iv) Based on communications from the Commission, no stop order suspending the effectiveness of either the Registration Statement or the Rule 462(b) Registration Statement, if any, has been issued and, to the Company’s knowledge, no proceeding for that purpose has been initiated or threatened by the Commission. Any reference herein to the Registration Statement, any Preliminary Prospectus, the Sale Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the exhibits incorporated by reference therein pursuant to the Rules and Regulations on or before the effective date of the Registration Statement, the date of such Preliminary Prospectus, the Sale Preliminary Prospectus or the date of the Prospectus, as the case may be. Any reference herein to the terms “amend”, “amendment” or “supplement” with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include: (i) the filing of any document under the Securities Exchange Act of 1934, as amended, and together with the Rules and Regulations promulgated thereunder (the “Exchange Act”) after the effective date of the Registration Statement, the date of such Preliminary Prospectus, the Sale Preliminary Prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference, and (ii) any such document so filed.
Maxim Group LLC
June __, 2007
Page 3 of 42
Page 3 of 42
(vi) If, subsequent to the date of this Agreement, the Company or the Representative determine that, at the Time of Sale, the Sale Preliminary Prospectus included an untrue statement of a material fact or omitted a statement of material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and have agreed to provide an opportunity to purchasers of the Firm Units to terminate their old purchase contracts and enter into new purchase contracts, then the Sale Preliminary Prospectus will be deemed to include any additional information available to purchasers at the time of entry into the first such new purchase contract.
(b) At the time of the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement or the effectiveness of any post-effective amendment to the Registration Statement, when the Prospectus is first filed with the Commission pursuant to Rule 424(b), when any supplement to or amendment of the Prospectus is filed with the Commission, when any document filed under the Exchange Act was or is filed and at the Closing Date and the Additional Closing Date (as hereinafter respectively defined), if any, the Registration Statement (including Amendment No. 3 and Amendment No. 4), the Sale Preliminary Prospectus (including the May 31 Prospectus, the June 4 Prospectus and the Permitted FWP) and the Prospectus and any amendments thereof and supplements or exhibits thereto complied or will comply in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the Rules and Regulations, and did not and will not contain an untrue statement of a material fact and did not and will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein: (i) in the case of the Registration Statement, not misleading, and (ii) in the case of the Sale Preliminary Prospectus (including the May 31 Prospectus, the June 4 Prospectus and the Permitted FWP) or the Prospectus in light of the circumstances under which they were made, not misleading. When any Preliminary Prospectus (including the Sale Preliminary Prospectus) was first filed with the Commission (whether filed as part of the registration statement for the registration of the Shares or any amendment thereto or pursuant to Rule 424(a) under the Securities Act), and when any amendment thereof or supplement thereto was first filed with the Commission, such Preliminary Prospectus and any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the Rules and Regulations and did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No representation and warranty is made in this subsection (b), however, with respect to any information contained in or omitted from the Registration Statement or the Prospectus or any related Preliminary Prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representative specifically for use therein. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of the names of the Underwriters appearing in the “Underwriting” section of the Prospectus and the following additional disclosure contained in the “Underwriting” section of the Prospectus: (i) the fourth paragraph under the heading “Nature of Underwriting Commitment”, (ii) the second paragraph under the heading “Lock-Ups”, (iii) the final paragraph under the heading “Stabilization” and (iv) all paragraphs under the heading “Foreign Regulatory Restrictions on Purchase of Shares” (collectively, the “Underwriters’ Information”).
Maxim Group LLC
June __, 2007
Page 4 of 42
Page 4 of 42
(d) The documents, exhibits or other materials incorporated or deemed to be incorporated by reference in the Sale Preliminary Prospectus or the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Securities Act, the Exchange Act and the Rules and Regulations, and, when read together with the other information in the Sale Preliminary Prospectus or the Prospectus, do not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. There are no contracts or other documents (including, without limitation, any voting agreement), which are required to be described in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus or filed as exhibits to the Registration Statement by the Securities Act, the Exchange Act or the Rules and Regulations and which have not been so described, filed or incorporated by reference.
(e) Singer Lewak Greenbaum & Goldstein LLP (“SLGG”), whose reports relating to the Company are included in the Registration Statement, are independent public accountants as required by the Securities Act, the Exchange Act, the Rules and Regulations and the rules and regulations promulgated by the Public Company Accounting Oversight Board (the “PCAOB”). SLGG is duly registered and in good standing with the PCAOB. SLGG has not, during the periods covered by the financial statements included in the Registration Statement, the Preliminary Prospectus and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
Maxim Group LLC
June __, 2007
Page 5 of 42
Page 5 of 42
(g) Except for Response Genetics, Ltd. (the “Subsidiary”), the Company has no direct or indirect subsidiaries and owns no equity interest in any other foreign or domestic individual, corporation, trust, general or limited partnership, joint venture, limited liability company or other entity (each, a “Person”). Unless the context specifically requires otherwise, the term “Company” as used in this Agreement means the Company and the Subsidiary collectively on a consolidated basis.
(h) Subsequent to the respective dates as of which information is presented in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, and except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus: (i) the Company has not declared, paid or made any dividends or other distributions of any kind on or in respect of its capital stock, and (ii) there has been no material adverse change (or, to the knowledge of the Company, any development which has a high probability of involving a material adverse change in the future), whether or not arising from transactions in the ordinary course of business, in or affecting: (A) the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects (as such prospects are disclosed or described in the Sale Preliminary Prospectus and the Prospectus) of the Company; (B) the long-term debt or capital stock of the Company; or (C) the Offering or consummation of any of the other transactions contemplated by this Agreement, the Registration Statement or the Prospectus (a “Material Adverse Change”). Since the date of the latest balance sheet presented in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, the Company has not incurred or undertaken any liabilities or obligations, whether direct or indirect, liquidated or contingent, matured or unmatured, or entered into any transactions, including any acquisition or disposition of any business or asset, which are material to the Company, except for liabilities, obligations and transactions which are disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus.
Maxim Group LLC
June __, 2007
Page 6 of 42
Page 6 of 42
(j) All of the issued and outstanding shares of capital stock of the Company (including, without limitation, the Company’s Series A Junior Convertible Preferred Stock and Series B Convertible Preferred Stock) are fully paid and non-assessable (and those shares of Common Stock issuable upon conversion of the Company’s notes, Series A Junior Convertible Preferred Stock and Series B Convertible Preferred Stock as described in the Registration Statement and the Prospectus, upon conversion thereof as described in the Registration Statement, will be fully paid and non-assessable) and have been duly and validly authorized and issued, in compliance with all applicable state, federal and (except as disclosed in the Sale Preliminary Prospectus and the Prospectus) foreign securities laws, rules and regulations and not in violation of or subject to any preemptive or similar right that does or will entitle any Person (as defined below), upon the issuance or sale of any security, to acquire any Relevant Security from the Company. As used herein, the term “Relevant Security” means any Common Stock or other security of the Company that is convertible into, or exercisable or exchangeable for Common Stock or equity securities, or that holds the right to acquire any Common Stock or equity securities of the Company or any other such Relevant Security, except for such rights as may have been fully satisfied or waived prior to the effectiveness of the Registration Statement.
(k) The Shares have been duly and validly authorized and, when issued, delivered and paid for in accordance with this Agreement and as described in the Sale Preliminary Prospectus and the Prospectus on each of the Closing Date and the Additional Closing Date, as applicable, will be duly and validly issued, fully paid and non-assessable, will have been issued in compliance with all applicable state and federal and foreign laws, rules and regulations and will not have been issued in violation of or subject to any preemptive or similar right that does or will entitle any Person to acquire any Relevant Security from the Company upon issuance or sale of Shares in the Offering. The shares of Common Stock representing the Shares conform to the descriptions thereof contained in the Registration Statement and the Sale Preliminary Prospectus and the Prospectus. Except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, the Company has no outstanding warrants, options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, or any contracts or commitments to issue or sell, any Relevant Security.
(l) Except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, no director or officer of the Company named in the Sale Preliminary Prospectus and the Prospectus and/or who will be acting as such following the Closing as described in the Sale Preliminary Prospectus or the Prospectus holds any direct equity, debt or other pecuniary interest in any Person with whom the Company does business or is in privity of contract with, other than, in each case, indirectly through the ownership by such individuals of shares of Common Stock
Maxim Group LLC
June __, 2007
Page 7 of 42
Page 7 of 42
(n) The Company and the Subsidiary are not: (i) in violation of their certificate of incorporation, by-laws or other organizational documents (including shareholders’, voting or similar agreements), (ii) in default under, and no event has occurred which, with notice or lapse of time or both, would constitute a default under or result in the creation or imposition of any lien, charge, mortgage, pledge, security interest, claim, equity, trust or other encumbrance, preferential arrangement, defect or restriction of any kind whatsoever (“Lien”) upon any of their property or assets pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which they are a party or by which they are bound or to which any of their property or assets is subject or (iii) is in violation in any respect of any law, rule, regulation, ordinance, directive, judgment, decree or order of any judicial, regulatory or other legal or governmental agency or body, foreign or domestic, except (in the case of clause (ii) above) for any Lien disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus and except, in the case of each of clauses (ii) and (iii), for any default, violation or event that would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect.
(o) The Company has full right, power and authority to execute and deliver this Agreement, the Representative’s Warrant and all other agreements, documents, certificates and instruments required to be delivered pursuant to this Agreement (collectively, the “Transaction Documents”) and to perform its obligations hereunder and thereunder and to consummate each of the transactions contemplated by each of the Transaction Documents. The Company has duly and validly authorized each of the Transaction Documents and each of the transactions contemplated by the Transaction Documents. Each of the Transaction Documents have been or will be duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Maxim Group LLC
June __, 2007
Page 8 of 42
Page 8 of 42
(q) The Company has all material consents, approvals, authorizations, orders, registrations, qualifications, licenses, filings and permits of, with and from all judicial, regulatory and other legal or governmental agencies and bodies and all third parties, foreign and domestic (collectively, the “Consents”), to own, lease and operate its properties and conduct its business as it is now being conducted and as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, and each such Consent is valid and in full force and effect. The Company has not received notice of any investigation or proceedings which results in or, if decided adversely to the Company, could reasonably be expected to result in, the revocation of any Consent or reasonably be expected to have a Material Adverse Effect. No Consent contains a materially burdensome restriction not adequately disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus.
(r) The Company is in compliance with all applicable laws, rules, regulations, ordinances, directives, judgments, decrees and orders, foreign and domestic, including those relating to transactions with Affiliates, the non-compliance with which would not have a Material Adverse Effect.
(s) The Representative’s Warrant will conform to the description thereof in the Registration Statement and in the Prospectus and, when sold to and paid for by the Representative in accordance with the Representative’s Warrant, will have been duly authorized and validly issued and will constitute a valid and binding obligation of the Company. The shares of Common Stock issuable upon exercise of the Representative’s Warrant (the “Representative’s Warrant Shares”) have been duly authorized and reserved for issuance upon exercise of the Representative’s Warrant by all necessary corporate action on the part of the Company and, when issued and delivered and paid for upon such exercise in accordance with the terms of the Representative’s Warrant, will be validly issued, fully paid, nonassessable and free of preemptive rights and will conform to the description thereof in the Prospectus.
Maxim Group LLC
June __, 2007
Page 9 of 42
Page 9 of 42
(u) Except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, there is no judicial, regulatory, arbitral or other legal or governmental proceeding or other litigation or arbitration, domestic or foreign, pending to which the Company is a party or of which any property, operations or assets of the Company is the subject which, either individually or in the aggregate, if determined adversely to the Company, could reasonably be expected to have a Material Adverse Effect. To the Company’s knowledge, no such proceeding, litigation or arbitration is threatened or contemplated. The defense of all actual or pending proceedings, litigation and arbitration against or involving the Company is not reasonably expected by the Company to have a Material Adverse Effect.
(v) The financial statements, including the notes thereto, and any supporting schedules included in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus present fairly the financial position as of the dates indicated and the cash flows and results of operations for the periods specified of the Company. Except as otherwise stated in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, said financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved. Any supporting schedules included in the Registration Statement and the Prospectus present fairly the information required to be stated therein. No other financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement. The other financial and statistical information included in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus present fairly the information included therein and have been prepared on a basis consistent with that of the financial statements that are included in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus and the books and records of the respective entities presented therein.
Maxim Group LLC
June __, 2007
Page 10 of 42
Page 10 of 42
(x) The statistical, industry-related and market-related data included in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate, and such data agree with the sources from which they are derived.
(y) Except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, the Company maintains a system of internal accounting and other controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with United States generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accounting for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(z) The Company’s Board of Directors has validly appointed an audit committee and nominating committee whose composition satisfies the requirements of the rules and regulations of the NCM and the Company’s Board of Directors and/or audit committee and the nominating committee has each adopted a charter that satisfies the requirements of NCM. Neither the Company’s Board of Directors nor the audit committee thereof has been informed, nor is any director of the Company aware, of: (i) except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
Maxim Group LLC
June __, 2007
Page 11 of 42
Page 11 of 42
(bb) No relationship, direct or indirect, exists between or among any of the Company or any Affiliate of the Company, on the one hand, and any director, officer, shareholder, customer or supplier of the Company or any Affiliate of the Company, on the other hand, which is required by the Securities Act, the Exchange Act or the Rules and Regulations to be described in the Registration Statement, the Sale Preliminary Prospectus or the Prospectus which is not so described as required. Except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, there are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members, except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus. The Company has not, in violation of Sarb-Ox, directly or indirectly, including through any Affiliate of the Company (other than as permitted under the Sarb-Ox for depositary institutions), extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan to or for any director or executive officer of the Company.
(cc) Transactions Affecting Disclosure to NASD.
(i) Except as described in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company with respect to the sale of the Shares hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, the Company’s officers, directors and employees that may affect the Underwriters’ compensation, as determined by the NASD.
(ii) Except as previously disclosed by the Company to the Representative in writing, no officer, director, or beneficial owner of 5% or more of any class of the Company’s securities (whether debt or equity, registered or unregistered, regardless of the time acquired or the source from which derived) or any other Affiliate is a member or a person associated, or affiliated with a member of the NASD.
(iii) No proceeds from the sale of the Shares (excluding underwriting compensation) will be paid to any NASD member, or any persons associated or affiliated with a member of the NASD, except as specifically contemplated herein.
Maxim Group LLC
June __, 2007
Page 12 of 42
Page 12 of 42
(dd) Intellectual Property.
(i) The Company owns, licenses or possess the right to use sufficient trademarks, trade names, patents, patent rights, copyrights, domain names, licenses, approvals, trade secrets, inventions, technology, know-how and other similar rights (collectively, “Intellectual Property Rights”) as are reasonably necessary or material to conduct its business as now conducted and contemplated to be conducted, each as described in the Registration Statement, the Sale Preliminary Prospectus and Prospectus.
(ii) Except as set forth in the Registration Statement, the Sale Preliminary Prospectus and Prospectus: (A) there is no actual, pending or, to the Company’s knowledge, threatened action, suit, proceeding, or claim by others challenging the Company’s rights in or to any Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (B) there is no actual, pending or, to the Company’s knowledge, threatened action, suit, proceeding, or claim by others that the Company infringes, misappropriates, or otherwise violates any Intellectual Property Rights of others, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (C) there is no actual, pending or, to the Company’s knowledge, threatened action, suit, proceeding, or claim by others challenging the validity or scope of any such Intellectual Property Rights owned by the Company and the Company is unaware of any facts which would form a reasonable basis for any such claim; (D) the operation of Company’s business as now conducted and in connection with the development and commercialization of its technology described in the Registration Statement, the Sale Preliminary Prospectus and Prospectus does not infringe any claim of any patent or published patent application; (E) there is no prior art of which the Company is aware that may render any patent owned or licensed by the Company invalid or any patent application owned or licensed by the Company unpatentable which has not been disclosed to the applicable government patent office; and (F) the patents, trademarks, and copyrights granted or issued to the Company have been duly maintained and are in full force and in effect, and none of such patents, trademarks and copyrights have been adjudged invalid or unenforceable in whole or in part. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, the Sale Preliminary Prospectus and Prospectus and are not described therein in all material respects.
(iii) The Company has duly and properly filed or caused to be filed with the U. S. Patent and Trademark Office (the “PTO”) and applicable foreign and international patent authorities all patent applications owned by the Company (the “Company Patent Applications”). The Company has complied in all material respects with the PTO’s duty of candor and disclosure for the Company Patent Applications and has made no material misrepresentation in the Company Patent Applications. The Company Patent Applications disclose patentable subject matters, and the Company has not been notified of any inventorship challenges nor has any interference been declared or provoked nor is any material fact known by the Company that would preclude the issuance of patents with respect to the Company Patent Applications or would render such patents invalid or unenforceable. Except with respect to the rights of the University of Southern California as described in the Sale Preliminary Prospectus and Prospectus, no third party possesses rights to the Company’s Intellectual Property Rights that, if exercised, could enable such party to develop products competitive to those the Company intends to develop as described in the Sale Preliminary Prospectus and the Prospectus.
Maxim Group LLC
June __, 2007
Page 13 of 42
Page 13 of 42
(v) The Company has obtained legally binding written agreements from all employees and third parties with whom the Company has shared confidential proprietary information: (A) of the Company, or (B) received from others which the Company is obligated to treat as confidential, which agreements require such employees and third parties to keep such information confidential.
(vi) Except as would not have a Material Adverse Effect, the Company is and its operations have been conducted at all times in compliance with foreign, federal, state and municipal laws, rules and regulations as required by such laws for each activity and in each jurisdiction where the Company is doing business. The Company possesses valid and current licenses, registrations, certificates, permits and other authorizations issued by the appropriate foreign, federal, state or local regulatory authorities as necessary to conduct its respective businesses (collectively, the “Licensing Requirements”), except where the failure of a Licensing Requirement would not have a Material Adverse Effect. The Company has not received any notice of proceedings relating to the revocation or modification of, or noncompliance with, any such license, certificate, permit or authorization, which could result in a Material Adverse Effect. Further, no action, suit or proceeding, other than routine audits, by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the removal, revocation, suspension or other termination of the authority to operate under the Licensing Requirements is pending or, to the Company’s knowledge, threatened. The Company does not believe that any pending audit is reasonably likely to result in the removal, revocation, suspension or other termination of the Company’s authority to operate under the Licensing Requirements.
Maxim Group LLC
June __, 2007
Page 14 of 42
Page 14 of 42
(ff) Neither the Company nor any of its Affiliates has, prior to the date hereof, made any offer or sale of any securities which are required to be “integrated” pursuant to the Securities Act or the Rules and Regulations with the offer and sale of the Shares pursuant to the Registration Statement.
(gg) Except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, no holder of any Relevant Security has any rights to require registration of any Relevant Security as part or on account of, or otherwise in connection with, the offer and sale of the Shares contemplated hereby, and any such rights so disclosed have either been fully complied with by the Company or effectively waived by the holders thereof, and any such waivers remain in full force and effect.
(hh) Except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, no holder of any Relevant Security has any rights of rescission of similar rights with respect to the Relevant Securities held by them.
(ii) The Company is not and, at all times up to and including consummation of the transactions contemplated by this Agreement, and after giving effect to application of the net proceeds of the Offering, will not be, subject to registration as an “investment company” under the Investment Company Act of 1940, as amended, and is not and will not be an entity “controlled” by an “investment company” within the meaning of such act.
(jj) Except as disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, there are no contracts, agreements or understandings between the Company and any Person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated by this Agreement or any arrangements, agreements, understandings, payments or issuance with respect to the Company or any of its officers, directors, shareholders, partners, employees or Affiliates that may affect the Underwriters’ compensation as determined by the NASD.
(kk) The Company owns or leases all such properties as are necessary to the conduct of its business as presently operated and as proposed to be operated as described in the Registration, the Sale Preliminary Prospectus and the Prospectus. The Company has good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by it, in each case free and clear of all Liens except such as are described in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus or such as do not (individually or in the aggregate) materially affect the business or prospects of the Company. Any real property and buildings held under lease or sublease by the Company is held by under valid, subsisting and enforceable leases with such exceptions as are not material to, and do not interfere with, the use made and proposed to be made of such property and buildings by the Company. The Company has not received any notice of any claim adverse to its ownership of any real or personal property or of any claim against the continued possession of any real property, whether owned or held under lease or sublease by the Company.
Maxim Group LLC
June __, 2007
Page 15 of 42
Page 15 of 42
(mm) The Company has accurately prepared and timely filed all federal, state, foreign and other tax returns that are required to be filed by it and has paid or made provision for the payment of all taxes, assessments, governmental or other similar charges, including without limitation, all sales and use taxes and all taxes which the Company is obligated to withhold from amounts owing to employees, creditors and third parties, with respect to the periods covered by such tax returns (whether or not such amounts are shown as due on any tax return). No deficiency assessment with respect to a proposed adjustment of the Company’s federal, state, local or foreign taxes is presently in effect or is pending or, to the Company’s knowledge, threatened. The accruals and reserves on the books and records of the Company in respect of tax liabilities for any taxable period not finally determined are adequate to meet any assessments and related liabilities for any such period and, since the date of the Company’s most recent audited financial statements, the Company has not incurred any material liability for taxes other than in the ordinary course of its business. There is no tax lien, whether imposed by any federal, state, foreign or other taxing authority, outstanding against the assets, properties or business of the Company.
Maxim Group LLC
June __, 2007
Page 16 of 42
Page 16 of 42
(oo) The Company has at all times operated its business in material compliance with all Environmental Laws, and no material expenditures are or will be required in order to comply therewith. The Company has not received any notice or communication that relates to or alleges any actual or potential violation or failure to comply with any Environmental Laws that will result in a Material Adverse Effect. As used herein, the term “Environmental Laws” means all applicable laws and regulations, including any licensing, permits or reporting requirements, and any action by a Federal state or local government entity pertaining to the protection of the environment, protection of public health, protection of worker health and safety, or the handling of hazardous materials, including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1321, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1, et seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq.
(pp) Except as set forth in the Registration Statement, the Sale Preliminary Prospectus or the Prospectus, the Company is not a party to an “employee benefit plan,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”) which: (i) is subject to any provision of ERISA and (ii) is or was at any time maintained, administered or contributed to by the Company and covers any employee or former employee of the Company or any ERISA Affiliate (as defined hereafter). These plans are referred to collectively herein as the “Employee Plans.” For purposes of this paragraph, “ERISA Affiliate” of any person or entity means any other person or entity which, together with that person or entity, could be treated as a single employer under Section 414(m) of the Internal Revenue Code of 1986, as amended (the “Code”), or is an “affiliate,” whether or not incorporated, as defined in Section 407(d)(7) of ERISA, of the person or entity.
(qq) The Representative has been provided with written evidence of each employment, severance or other similar arrangement or policy and each material plan or arrangement providing for insurance coverage (including any self-insured arrangements), workers’ compensation, disability benefits, severance benefits, supplemental unemployment benefits, vacation benefits, retirement benefits or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation or other forms of incentive compensation, or post-retirement insurance, compensation or benefits which: (i) is not an Employee Plan, (ii) is entered into, maintained or contributed to, as the case may be, by the Company or any of their respective ERISA Affiliates, and (iii) covers any employee or former employee of the Company or any of their respective ERISA Affiliates. These contracts, plans and arrangements are referred to collectively in this Agreement as the “Benefit Arrangements.” Each Benefit Arrangement has been maintained in substantial compliance with its terms and with requirements prescribed by any and all statutes, orders, rules and regulations that are applicable to that Benefit Arrangement.
Maxim Group LLC
June __, 2007
Page 17 of 42
Page 17 of 42
(ss) Except as set forth in the Registration Statement, the Sale Preliminary Prospectus or the Prospectus, and except with respect to the Company’s written agreements or arrangements with certain Company employees (whose names and remuneration arrangements with the Company have been previously disclosed in writing by the Company to the Representative), the Company is not a party to or subject to any employment contract or arrangement providing for annual future compensation, or the opportunity to earn annual future compensation (whether through fixed salary, bonus, commission, options or otherwise) of more than $60,000 to any officer, consultant, director or employee.
(tt) The execution of this Agreement, the Representative’s Warrant or any other Transaction Document and consummation of the transactions contemplated hereby and thereby does not constitute a triggering event under any Employee Plan or any other employment contract, whether or not legally enforceable, which (either alone or upon the occurrence of any additional or subsequent event) will or may result in any payment (of severance pay or otherwise), acceleration, increase in vesting, or increase in benefits to any current or former participant, employee or director of the Company.
(uu) No “prohibited transaction” (as defined in either Section 406 of the ERISA or Section 4975 of Code), “accumulated funding deficiency” (as defined in Section 302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan for which the Company would have any liability; each employee benefit plan of the Company is in compliance in all material respects with applicable law, including (without limitation) ERISA and the Code; the Company has not incurred and does not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from any “pension plan”; and each employee benefit plan of the Company that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.
Maxim Group LLC
June __, 2007
Page 18 of 42
Page 18 of 42
(ww) The Company has not offered, or caused the Underwriters to offer, the Firm Shares to any Person or entity with the intention of unlawfully influencing: (i) a customer or supplier of the Company or its Affiliates to alter the customer’s or supplier’s level or type of business with the Company or any of its Affiliates or (ii) a journalist or publication to write or publish favorable information about the Company, any Affiliate or their respective products or services.
(xx) Except as described in the Sale Preliminary Prospectus, the Prospectus and the Registration Statement, the Company: (i) is and at all times has been in full compliance with all statutes, rules, regulations or guidance applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product manufactured, distributed or sold by the Company or any component thereof (such statutes, rules, regulations or guidance, collectively, “Applicable Laws”); (ii) has not received any notice of adverse finding, warning letter, untitled letter or other correspondence or notice from the FDA or any other federal, state, local or foreign governmental authority having authority over the Company (“Governmental Authority”) alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”); (iii) possesses all Authorizations and such Authorizations are valid and in full force and effect and are not in violation of any term of any such Authorizations; (iv) has not received notice of any claim, suit, proceeding, hearing, enforcement, audit, investigation, arbitration or other action from any Governmental Authority or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Authority or third party is considering any such claim, suit, proceeding, hearing, enforcement, audit, investigation, arbitration or other action; (v) has not received notice that any Governmental Authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such Governmental Authority is considering such action; (vi) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission), except, in the case of each of clauses (i), (ii) and (iii), for any default, violation or event that would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect..
Maxim Group LLC
June __, 2007
Page 19 of 42
Page 19 of 42
(zz) As used in this Agreement, references to matters being “material” with respect to the Company shall mean a material event, change, condition, status or effect related to the condition (financial or otherwise), properties, assets (including intangible assets), liabilities, business, prospects (as such prospects are disclosed or described in any Preliminary Prospectus or the Prospectus), operations or results of operations of the Company and the Subsidiary, taken as a whole.
(aaa) As used in this Agreement, the term “knowledge of the Company” (or similar language) shall mean the knowledge of the officers and directors of the Company who are named in the Sale Preliminary Prospectus and the Prospectus, with the assumption that such officers and directors shall have made reasonable and diligent inquiry of the matters presented (with reference to what is customary and prudent for the applicable individuals in connection with the discharge by the applicable individuals of their duties as officers or directors of the Company).
(bbb) Any certificate signed by or on behalf of the Company and delivered to the Representative or to Ellenoff Grossman & Schole LLP, counsel for the Representative (“Underwriters’ Counsel”), shall be deemed to be a representation and warranty by the Company to each Underwriter listed on Schedule A hereto as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Shares and the Representative’s Warrants.
(a) On the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter and each Underwriter, severally and not jointly, agrees to purchase from the Company, at a purchase price per share of $_______, the number of Firm Shares set forth opposite their respective names on Schedule A hereto together with any additional number of Shares which such Underwriter may become obligated to purchase pursuant to the provisions of Section 9 hereof.
Maxim Group LLC
June __, 2007
Page 20 of 42
Page 20 of 42
(c) Payment of the purchase price for the Firm Shares shall be made by wire transfer in immediately available funds to or as directed by the Company upon delivery of certificates for the Firm Shares to the Representative through the facilities of The Depository Trust Company for the respective accounts of the several Underwriters. Certificates for the Firm Shares shall be registered in such name or names and shall be in such denominations as the Representative may request at least two (2) business days before the Closing Date.
(d) In addition, on the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, the Company hereby grants to the Underwriters an option to purchase up to an aggregate of _______ Additional Shares at the same purchase price per share to be paid by the Underwriters for the Firm Shares as set forth in Section 2(a) above, for the sole purpose of covering over-allotments in the sale of Firm Shares by the Underwriters. This option may be exercised at any time and from time to time on or before the forty-fifth (45th) day following the final date of the Prospectus, by written notice from the Representative to the Company. Such notice shall set forth the aggregate number of Additional Shares as to which the option is being exercised and the date and time, as reasonably determined by the Representative, when the Additional Shares are to be delivered (any such date and time being herein sometimes referred to as the “Additional Closing Date”); provided, however, that no Additional Closing Date shall occur earlier than the Closing Date or earlier than the third (3rd) full business day after the date on which the option shall have been exercised nor later than the eighth (8th) full business day after the date on which the option shall have been exercised (unless such time and date are postponed in accordance with the provisions of Section 9 hereof). Upon any exercise of the option as to all or any portion of the Additional Shares, each Underwriter, acting severally and not jointly, agrees to purchase from the Company the number of Additional Shares that bears the same proportion of the total number of Additional Shares then being purchased as the number of Firm Shares set forth opposite the name of such Underwriter on Schedule A hereto (or such number increased as set forth in Section 9 hereof) bears to the total number of Firm Shares that the Underwriters have agreed to purchase hereunder, subject, however, to such adjustments to eliminate fractional shares as the Representative in its sole discretion shall make.
Maxim Group LLC
June __, 2007
Page 21 of 42
Page 21 of 42
(f) Payment of the purchase price for the Additional Shares shall be made by wire transfer in immediately available funds to or as directed by the Company upon delivery of certificates for the Additional Shares to the Representative through the facilities of The Depository Trust Company for the respective accounts of the several Underwriters. Certificates for the Additional Shares shall be registered in such name or names and shall be in such denominations as the Representative may request at least two (2) business days before the Additional Closing Date. The Company will permit the Representative to examine and package such certificates for delivery at least one full business day prior to the Additional Closing Date.
(g) On the Closing, the Company will further issue and sell to the Representative or, at the direction of the Representative, to other Underwriters or selling group members or bona fide officers of the Underwriters or selling group members, for an aggregate purchase price of $100, the Representative’s Warrant, which shall entitle the holders thereof to purchase an aggregate of ________ shares of Common Stock for a period of five years from the effective date of the Registration Statement commencing on the six-month anniversary of the effective date of the Registration Statement. The Representative’s Warrant shall be exercisable at a price equal to 110% of the initial public offering price of the Common Stock and shall contain terms and provisions more fully described herein below and as set forth more particularly in the Representative’s Warrant to be executed by the Company on the Closing Date, including, but not limited to: (i) one demand and customary piggyback registration rights at the Company’s expense for a period of five years after the Closing, (ii) one demand registration right at the Representative’s expense for a period of five years after the Closing, (iii) cashless exercise; (iv) customary anti-dilution provisions in the event of stock dividends, splits, mergers, sales of all or substantially all of the Company’s assets; and (v) prohibitions of mergers, consolidations or other reorganizations of or by the Company or the taking by the Company of other action during the five-year period following the effective date of the Registration Statement unless adequate provision is made to preserve, in substance, the rights and powers incidental to the Representative’s Warrant. The Representative’s Warrant shall not be redeemable. As provided in the Representative’s Warrant, the Representative may designate that the Representative’s Warrant be issued in varying amounts directly to other Underwriters and selling group members and to bona fide officers of the Underwriters and selling group members. As further provided, no sale, transfer, assignment, pledge or hypothecation of the Representative’s Warrant shall be made for a period of 6 months from the Closing Date, except: (a) by operation of law or reorganization of the Company, or (b) to the Underwriters and bona fide partners, officers of the Underwriters and selling group members.
Maxim Group LLC
June __, 2007
Page 22 of 42
Page 22 of 42
4. Covenants of the Company. The Company acknowledges, covenants and agrees with the Underwriters that:
(a) The Registration Statement and any amendments thereto have been declared effective, and if Rule 430A is used or the filing of the Prospectus is otherwise required under Rule 424(b), the Company will file the Prospectus (properly completed if Rule 430A has been used) pursuant to Rule 424(b) within the prescribed time period and will provide evidence satisfactory to the Representative of such timely filing.
(b) The Company will notify the Representative immediately (and, if requested by the Representative, will confirm such notice in writing): (i) when the Registration Statement and any amendments thereto become effective, (ii) of any request by the Commission for any amendment of or supplement to the Registration Statement, the Sale Preliminary Prospectus or the Prospectus or for any additional information, (iii) of the Company’s intention to file or prepare any supplement or amendment to the Registration Statement or the Prospectus, (iv) of the mailing or the delivery to the Commission for filing of any amendment of or supplement to the Registration Statement, the Sale Preliminary Prospectus or the Prospectus, including but not limited to Rule 462(b) under the Securities Act, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of the initiation, or the threatening, of any proceedings therefor, it being understood that the Company shall make every effort to avoid the issuance of any such stop order, (vi) of the receipt of any comments from the Commission, and (vii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose to enter a stop order at any time, the Company will make every reasonable effort to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such order as soon as possible. The Company will not file any amendment to the Registration Statement or any amendment of or supplement to the Sale Preliminary Prospectus or the Prospectus (including the prospectus required to be filed pursuant to Rule 424(b)) that differs from the prospectus on file at the time of the effectiveness of the Registration Statement or file any document under the Exchange Act if such document would be deemed to be incorporated by reference into the Prospectus to which the Representative shall object in writing after being timely furnished in advance a copy thereof. The Company will provide the Representative with copies of all such amendments, filings and other documents prior to any filing or other publication thereof and also afford the Representative a reasonable opportunity and time to review and comment thereon.
(c) The Company shall comply with the Securities Act, the Exchange Act and all applicable Rules and Regulations to permit completion of the distribution as contemplated in this Agreement, the Registration Statement and the Prospectus. If, at any time when a prospectus relating to the Shares is required to be delivered under the Securities Act, the Exchange Act and all applicable Rules and Regulations in connection with the sales of Shares, any event shall have occurred as a result of which the Prospectus as then amended or supplemented would, in the judgment of the Underwriters or the Company, include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances existing at the time of delivery to the purchaser, not misleading, or if, to comply with the Securities Act, the Exchange Act or the Rules and Regulations, it shall be necessary at any time to amend or supplement the Prospectus or Registration Statement, or to file any document which is an exhibit to the Registration Statement or the Prospectus or in any amendment thereof or supplement thereto, the Company will notify the Representative promptly and prepare and file with the Commission, subject to Section 4(a) hereof, an appropriate amendment or supplement (in form and substance reasonably satisfactory to the Representative) which will correct such statement or omission or which will effect such compliance and will use its reasonable best efforts to have any amendment to the Registration Statement declared effective as soon as possible.
Maxim Group LLC
June __, 2007
Page 23 of 42
Page 23 of 42
(e) The Company consents to the use and delivery of the Sale Preliminary Prospectus by the Underwriters in accordance with Rule 430 and Section 4(b) of the Securities Act.
(f) If the Company elects to rely on Rule 462(b) under the Securities Act, the Company shall both file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) and pay the applicable fees in accordance with Rule 111 of the Securities Act by the earlier of: (i) 10:00 p.m., New York City time, on the date of this Agreement, and (ii) the time that confirmations are given or sent, as specified by Rule 462(b)(2).
(g) During the period of 180 days after the effective date of the Registration Statement, neither the Company nor any of its Affiliates will directly or indirectly, take any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Shares.
Maxim Group LLC
June __, 2007
Page 24 of 42
Page 24 of 42
(i) The Company will make generally available to its security holders and to the Underwriters as soon as practicable, but in any event not later than twelve (12) months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Securities Act), an audited earnings statement of the Company complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158).
(j) During the twelve (12) months following the Closing Date, without the consent of the Representative which shall not be unreasonably withheld, the Company will not file any registration statement relating to the offer or sale of any of the Company’s securities, including any Registration Statement on Form S-8, except a Form S-8 filed with the Commission in connection with any of the Company’s stock option plans.
(k) Each of the Company’s officers and directors and holders of Common Stock, Series A Preferred Stock and Series B Preferred Stock (collectively, the “Lock-Up Parties”) shall, prior to the Closing, enter into a written “lock-up” agreement with the Representative in the form in the form attached hereto as Annex IV, it being agreed, however, that the lock-up period for the holders of the Company’s Series B Preferred Stock shall be 180 days from the Closing.
(l) During the twelve (12) month period following the Closing Date, the Company shall not, without the prior written consent of the Representative, offer, sell or distribute any of its securities, other than pursuant the Company’s 2006 Employee, Director and Consultant Plan or pursuant to the terms of any securities exercisable or convertible into shares of the Company’s capital stock that are outstanding at the Closing Date.
(m) During the twelve (12) months following the Closing, offer, sell or distribute any convertible securities convertible at a price that may, at the time of conversion, be less than the Fair Market Value of the Common Stock on the date of the original sale, without the consent of the Representative, which consent shall not be unreasonably withheld. For purposes of this Section 4, the term “Fair Market Value” shall mean the greater of: (i) the average of the volume weighted average price of the Company’s common stock for each of the 10 trading days prior to the date of the original sale; and (ii) the last sale price of the Common Stock, during normal operating hours, as reported on the NCM or Nasdaq Global Market (“NGM”) or the American Stock Exchange, or any other exchange or electronic quotation system on which the Common Stock is then listed.
Maxim Group LLC
June __, 2007
Page 25 of 42
Page 25 of 42
(o) The Company agrees that it will, upon completion of the proposed public offering contemplated herein, for a period of no less than three (3) years, maintain a liability insurance policy affording coverage for the acts of its officers and directors, and it agrees, if possible, to include such Observer or Director as an insured under such policy.
Maxim Group LLC
June __, 2007
Page 26 of 42
Page 26 of 42
(q) For a period of three (3) years from the effective date of the Registration Statement, the Company, at its expense, shall obtain and keep current a listing in the Standard & Poors or Mergent Manual or similar listing which qualifies the Company for resale exemptions;
(r) During the period of three (3) years from the effective date of the Registration Statement, the Company will furnish or make available via EDGAR to the Underwriters copies of all reports or other communications (financial or other) furnished to security holders or from time to time published or publicly disseminated by the Company, and will deliver to the Underwriters: (i) as soon as they are available, copies of any reports, financial statements and proxy or information statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as the Representative may from time to time reasonably request.
(s) The Company will not issue press releases or engage in any other publicity, without the Representative’s prior written consent (which consent shall not unreasonably be withheld, conditioned or delayed), for a period ending at 5:00 p.m. Eastern time on the first business day following the fortieth (40th) day following the Closing Date.
(t) The Company will use its good faith best efforts to maintain its key person life insurance with a insurer rated at least AA or better in the most recent addition of “Best’s Life Reports” in the amount of $1,500,000 on the life of Kathleen Danenberg in full force and effect for a period of three (3) years from the Closing Date. The Company shall be the sole beneficiary of such policy.
(u) Upon conclusion of the Offering, the Company will engage (for no less than two (2) years from the Closing Date) a financial public relations firm mutually acceptable to the Company and the Representative.
(v) The Company has or will retain a transfer agent reasonably acceptable to the Representative for the Shares and shall continue to retain such transfer agent (or another transfer agent reasonably acceptable to the Representatives) for a period of three (3) years following the Closing Date.
(w) The Company will apply the net proceeds from the sale of the Shares as set forth under the caption “Use of Proceeds” in the Prospectus. Without the written consent of the Representative, no proceeds of the Offering will be used to pay outstanding loans from officers, directors or shareholders or to pay any accrued salaries or bonuses to any employees or former employees, except as disclosed in the Prospectus.
Maxim Group LLC
June __, 2007
Page 27 of 42
Page 27 of 42
(y) The Company, during the period when the Prospectus is required to be delivered under the Securities Act or the Exchange Act, will use its best efforts to file all documents required to be filed with the Commission pursuant to the Securities Act, the Exchange Act and the Rules and Regulations within the time periods required thereby.
(z) The Company will do and perform all things required to be done or performed under this Agreement by the Company prior to the Closing Date or the Additional Closing Date, as the case may be, and satisfy all conditions precedent to the delivery of the Firm Shares and the Additional Shares.
(aa) The Company will not take, and will cause its Affiliates not to take, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Shares or any other shares of Common Stock.
(bb) The Company shall cause to be prepared and delivered to the Representative, at its expense, within one (1) business day from the effective date of this Agreement, an Electronic Prospectus to be used by the Underwriters in connection with the Offering. As used herein, the term “Electronic Prospectus” means a form of prospectus, and any amendment or supplement thereto, that meets each of the following conditions: (i) it shall be encoded in an electronic format, reasonably satisfactory to the Representative, that may be transmitted electronically by the other Underwriters to offerees and purchasers of the Shares for at least the period during which a Prospectus relating to the Shares is required to be delivered under the Securities Act; (ii) it shall disclose the same information as the paper prospectus and prospectus filed pursuant to EDGAR, except to the extent that graphic and image material cannot be disseminated electronically, in which case such graphic and image material shall be replaced in the electronic prospectus with a fair and accurate narrative description or tabular representation of such material, as appropriate; and (iii) it shall be in or convertible into a paper format or an electronic format, reasonably satisfactory to the Representative, that will allow recipients thereof to store and have continuously ready access to the prospectus at any future time, without charge to such recipients (other than any fee charged for subscription to the Internet as a whole and for on-line time). The Company hereby confirms that it has included or will include in the Prospectus filed pursuant to EDGAR or otherwise with the Commission and in the Registration Statement at the time it was declared effective an undertaking that, upon receipt of a request by an investor or his or her representative within the period when a prospectus relating to the Shares is required to be delivered under the Securities Act, the Company shall transmit or cause to be transmitted promptly, without charge, a paper copy of the Prospectus.
Maxim Group LLC
June __, 2007
Page 28 of 42
Page 28 of 42
5. Consideration; Payment of Expenses.
(a) In addition to selling the Shares to the Underwriters at the price per Share set forth in Section 2(a) hereof, in consideration of the services to be provided for hereunder, the Company shall pay to the Representative or its respective designees a non-accountable expense allowance equal to two percent (2.0%) of the gross proceeds of the Offering (exclusive of proceeds from the sale of Additional Shares), less $50,000 previously paid.
(b) The Representative reserves the right to reduce any item of its compensation or adjust the terms thereof as specified herein in the event that a determination shall be made by the NASD to the effect that the Underwriters’ aggregate compensation is in excess of NASD rules or that the terms thereof require adjustment.
(c) Whether or not the transactions contemplated by this Agreement, the Registration Statement and the Prospectus are consummated or this Agreement is terminated, the Company hereby agrees to pay all costs and expenses incident to the performance of its obligations hereunder, including the following:
(i) all expenses in connection with the preparation, printing, “edgarization” and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and any and all amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers;
(ii) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Shares and the Representative Warrant Shares under the Securities Act and the Offering;
(iii) the cost of producing this Agreement and any agreement among Underwriters, blue sky survey, closing documents and other instruments, agreements or documents (including any compilations thereof) in connection with the Offering, and, upon Closing, the cost of eight (8) bound volumes of such documents for the Representative and the cost of eight (8) lucite deal cubes;
Maxim Group LLC
June __, 2007
Page 29 of 42
Page 29 of 42
(v) all expenses in connection with the qualification of the Shares and the Representative Warrant Shares for offering and sale under state or foreign securities or blue sky laws, including the fees and disbursements of the Underwriters’ counsel in connection with such qualification and in connection with any blue sky survey undertaken by such counsel;
(vi) the filing fees incident to securing any required review by the NASD of the terms of the Offering;
(vii) all fees and expenses in connection with listing the Shares on the NCM;
(viii) all expenses incurred by the Company in connection with attending or hosting meetings with prospective purchasers of the Shares (“Road Show Expenses”);
(ix) any stock transfer taxes incurred in connection with the transfer of securities from the Company to the Underwriters pursuant to this Agreement or the Offering;
(x) the cost of preparing stock certificates representing the Shares;
(xi) the cost and charges of any transfer agent or registrar for the Shares; and
(xii) all other costs and expenses incident to the performance of the Company obligations hereunder which are not otherwise specifically provided for in this Section 5.
Notwithstanding anything to the contrary in this Section 5, any expenses (other than the legal expenses of Underwriters’ counsel) in excess of $3,000 shall be subject to the prior approval by the Company, which approval shall not be unreasonably withheld or delayed.
(d) At the Closing, the Company shall issue a payment of $30,000 to Underwriters’ Counsel in consideration of “Blue Sky” services rendered. The Company shall also pay, as due, state registration, qualification and filing fees, NASD filing fees and accountable out-of-pocket disbursements in connection with such registration, qualification or filing.
Maxim Group LLC
June __, 2007
Page 30 of 42
Page 30 of 42
(f) It is understood, however, that except as provided in this Section, and Sections 6, 7 and 10 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel. Notwithstanding anything to the contrary in this Section 5, in the event that this Agreement is terminated pursuant to Section 5 or 10(b) hereof, or subsequent to a Material Adverse Change, the Company will pay all out of pocket accountable expenses of the Underwriters (including but not limited to the reasonable fees and disbursements of counsel to the Underwriters, up to $50,000) incurred in connection herewith, less any amounts previously advanced to the Representative.
(g) For a period of eighteen (18) months from the effective date of the Registration Statement, if the Company proposes to be acquired by another entity, the Company shall first retain the Representative as its financial advisor and/or its investment banker in connection with such acquisition for the following fee:
(i) The greater of $500,000 or 1% of the aggregate value of the sale if the aggregate sale value is equal to or less than $50,000,000;
(ii) If the aggregate sale value is between $50,000,000 and $75,000,000, then the success fee will consist of the fees earned under (h)(i) above plus 0.75% of the amount between $50,000,000 and $75,000,000;
(iii) If the aggregate sale exceeds $75,000,000, then the success fee will consist of the fees earned under (h)(ii) above plus 0.5% of the amount in excess of $75,000,000.
6. Conditions of Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Firm Shares and the Additional Shares as provided herein shall be subject to: (i) the accuracy of the representations and warranties of the Company herein contained in all material respects, as of the date hereof and as of the Closing Date, (ii) the absence from any certificates, opinions, written statements or letters furnished to the Representative or to Underwriters’ Counsel pursuant to this Section 6 of any material misstatement or omission, (iii) the performance in all material respects by the Company of its obligations hereunder, and (iv) each of the following additional conditions. For purposes of this Section 6, the terms “Closing Date” and “Closing” shall refer to the Closing Date for the Firm Shares and any Additional Closing Date, if different, for the Additional Shares, and each of the foregoing and following conditions must be satisfied as of each Closing.
Maxim Group LLC
June __, 2007
Page 31 of 42
Page 31 of 42
(b) The Representative shall have received the favorable written opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., legal counsel for the Company, dated as of the Closing Date addressed to the Underwriters in the form attached hereto as Annex I.
(c) [Intentionally Omitted]
(d) The Representative shall have received the favorable written opinion of Kenyon & Kenyon LLP, special intellectual property counsel for the Company, dated as of the Closing Date addressed to the Underwriters in the form attached hereto as Annex II.
(e) All proceedings taken in connection with the sale of the Firm Shares and the Additional Shares as herein contemplated shall be satisfactory in form and substance to the Representative and to Underwriters’ Counsel.
(f) The Representative shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated as of the Closing Date to the effect that: (i) the condition set forth in subsection (a) of this Section 6 has been satisfied, (ii) as of the date hereof and as of the applicable Closing Date, the representations and warranties of the Company set forth in Section 1 hereof are accurate in all material respects, (iii) as of the applicable Closing Date, all agreements, conditions and obligations of the Company to be performed or complied with hereunder on or prior thereto have been duly performed or complied with in all material respects, (iv) the Company has not sustained any material loss or interference with their respective businesses, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, (v) no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof has been issued and no proceedings therefor have been initiated or threatened by the Commission, (vi) there are no pro forma or as adjusted financial statements that are required to be included or incorporated by reference in the Registration Statement and the Prospectus pursuant to the Rules and Regulations which are not so included or incorporated by reference and (vii) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus there has not been any material adverse change or any development involving a prospective material adverse change, whether or not arising from transactions in the ordinary course of business, in or affecting: (x) the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects (as such prospects are disclosed or described in any Preliminary Prospectus or the Prospectus) of the Company; (y) the long-term debt or capital stock of the Company; or (z) the Offering or consummation of any of the other transactions contemplated by this Agreement, the Registration Statement and the Prospectus.
Maxim Group LLC
June __, 2007
Page 32 of 42
Page 32 of 42
(h) Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), there shall not have been any material change in the capital stock or long-term debt of the Company or any change or development involving a change, whether or not arising from transactions in the ordinary course of business, in the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects (as such prospects are disclosed or described in any Preliminary Prospectus or the Prospectus) of the Company, including but not limited to the occurrence of any fire, flood, storm, explosion, accident, act of war or terrorism or other calamity, the effect of which, in any such case described above, is, in the sole judgment of the Representative, so material and adverse as to make it impracticable or inadvisable to proceed with the Offering on the terms and in the manner contemplated in the Prospectus (exclusive of any supplement).
(i) The Representative shall have received lock-up agreements from each Lock-Up Party, duly executed by the applicable Lock-Up Party, in the form attached hereto as Annex III.
(j) The Shares shall have been approved for listing on the NCM.
(k) The NASD shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements.
Maxim Group LLC
June __, 2007
Page 33 of 42
Page 33 of 42
(m) The Company shall have obtained a key person life insurance policy with an insurer rated at least AA or better in the most recent edition of “Best Life Reports” in the amount of at least $1,500,000 on the life of Kathleen Danenberg, and the Company shall have provided written evidence of such assignment to the Representative.
(n) The Company shall have furnished the Underwriters and Underwriters’ Counsel with such other certificates, opinions or other documents as they may have reasonably requested.
If any of the conditions specified in this Section 6 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to the Representative or to Underwriters’ Counsel pursuant to this Section 6 shall not be reasonably satisfactory in form and substance to the Representative and to Underwriters’ Counsel, all obligations of the Underwriters hereunder may be cancelled by the Representative at, or at any time prior to, the consummation of the Closing, and the obligations of the Underwriters to purchase the Additional Shares may be cancelled by the Representative at, or at any time prior to, the Additional Closing Date. Notice of such cancellation shall be given to the Company in writing, or by telephone. Any such telephone notice shall be confirmed promptly thereafter in writing.
7. Indemnification.
(a) The Company shall indemnify and hold harmless each Underwriter and each Person, if any, who controls each Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including, but not limited to, reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by the Company contained in the Registration Statement, as originally filed or any amendment thereof, or any related Preliminary Prospectus (including the Sale Preliminary Prospectus) or the Prospectus (in light of the circumstances in which such statement was made), or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission made by such party to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent but only to the extent that (i) any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with the Underwriters’ Information or (ii) such statement or omission was corrected in the Prospectus in conformity with the requirements of the Securities Act. This indemnity agreement will be in addition to any liability, which the Company may otherwise have, including but not limited to other liability under this Agreement. Notwithstanding the foregoing, the foregoing indemnity shall not inure to the benefit of any Underwriter (or any person controlling such Underwriter) from whom the person asserting any such losses, claims, damages or liabilities purchased Shares, if either a copy of a Permitted Free Writing Prospectus (previously approved in writing by the Representative as provided for in Section 4(cc) hereof) intended for general distribution to prospective investors or the Prospectus (in each case, as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law to have been delivered, at or prior to the written confirmation of the sale of the Shares to such person, and if such Permitted Free Writing Prospectus intended for general distribution to prospective investors or Prospectus, as applicable, would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 4(d) hereof.
Maxim Group LLC
June __, 2007
Page 34 of 42
Page 34 of 42
Maxim Group LLC
June __, 2007
Page 35 of 42
Page 35 of 42
8. Contribution. In order to provide for contribution in circumstances in which the indemnification provided for in Section 7 hereof is for any reason held to be unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, the Company and the Underwriters shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company, any contribution received by the Company from Persons, other than the Underwriters, who may also be liable for contribution, including Persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the Company) as incurred to which the Company and one or more of the Underwriters may be subject, in such proportions as is appropriate to reflect the relative benefits received by the Company and the Underwriters from the Offering or, if such allocation is not permitted by applicable law, in
Maxim Group LLC
June __, 2007
Page 36 of 42
Page 36 of 42
Maxim Group LLC
June __, 2007
Page 37 of 42
Page 37 of 42
(a) If any Underwriter or Underwriters shall default in its or their obligation to purchase Firm Shares or Additional Shares hereunder, and if the Firm Shares or Additional Shares with respect to which such default relates (the “Default Shares”) do not (after giving effect to arrangements, if any, made by the Representative pursuant to subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares or Additional Shares, each non-defaulting Underwriter, acting severally and not jointly, agrees to purchase from the Company that number of Default Shares that bears the same proportion of the total number of Default Shares then being purchased as the number of Firm Shares set forth opposite the name of such Underwriter on Schedule A hereto bears to the aggregate number of Firm Shares set forth opposite the names of the non-defaulting Underwriters, subject, however, to such adjustments to eliminate fractional shares as the Representative in its sole discretion shall make.
(b) In the event that the aggregate number of Default Shares exceeds 10% of the number of Firm Shares or Additional Shares, as the case may be, the Representative may in their discretion arrange for itself or for another party or parties (including any non-defaulting Underwriter or Underwriters who so agree) to purchase the Default Shares on the terms contained herein. In the event that within five calendar days after such a default the Representative do not arrange for the purchase of the Default Shares as provided in this Section 9, this Agreement or, in the case of a default with respect to the Additional Shares, the obligations of the Underwriters to purchase and of the Company to sell the Additional Shares shall thereupon terminate, without liability on the part of the Company with respect thereto or the Underwriters (except in each case as provided in Sections 5, 7, 8, 10 and 11(d)), but nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters of its or their liability, if any, to the other Underwriters and the Company for damages occasioned by its or their default hereunder.
(c) In the event that any Default Shares are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the Closing Date or Additional Closing Date, as the case may be for a period, not exceeding five (5) business days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment or supplement to the Registration Statement or the Prospectus which, in the reasonable opinion of Underwriters’ Counsel, may thereby be made necessary or advisable. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 9 with like effect as if it had originally been a party to this Agreement with respect to such Firm Shares and Additional Shares.
Maxim Group LLC
June __, 2007
Page 38 of 42
Page 38 of 42
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the later of: (i) receipt by the Representative and the Company of notification of the effectiveness of the Registration Statement or (ii) the execution of this Agreement.
(b) The Representative shall have the right to terminate this Agreement at any time prior to the consummation of the Closing or to terminate the obligations of the Underwriters to purchase the Additional Shares at any time prior to the consummation of any closing to occur on an Additional Closing Date, as the case may be, if:
(i) any domestic or international event or act or occurrence has materially disrupted, or in the opinion of the Representative will in the immediate future materially disrupt, the market for the Company’s securities or securities in general; or
(ii) trading on the New York Stock Exchange, the NGM, the NCM or the American Stock Exchange shall have been suspended or been made subject to material limitations, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the New York Stock Exchange, the NGM, the NCM or the American Stock Exchange or by order of the Commission or any other governmental authority having jurisdiction; or
(iii) a banking moratorium has been declared by any state or federal authority or if any material disruption in commercial banking or securities settlement or clearance services shall have occurred; or
Maxim Group LLC
June __, 2007
Page 39 of 42
Page 39 of 42
(c) Any notice of termination pursuant to this Section 11 shall be in writing.
(d) If this Agreement shall be terminated pursuant to any of the provisions hereof (other than pursuant to Section 9(b) hereof), or if the sale of the Shares provided for herein is not consummated because any condition to the obligations of the Underwriters set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will, subject to demand by the Representative, reimburse the Underwriters for all out-of-pocket expenses (including the reasonable fees and expenses of their counsel), incurred by the Underwriters in connection herewith.
12. Notices. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing, and:
(a) if sent to the Representative or any Underwriter, shall be mailed, delivered, or faxed and confirmed in writing, to Maxim Group LLC, 405 Lexington, New York, New York 10174, Attention: Clifford A. Teller, Director of Investment Banking, in each case, with a copy to Underwriters’ Counsel at Ellenoff Grossman & Schole LLP, 370 Lexington Avenue, 19th Floor, New York, New York, 10017, Attention: Douglas S. Ellenoff, Esq.; and
(b) if sent to the Company shall be mailed, delivered, or faxed and confirmed in writing to the Company and its counsel at the addresses set forth in the Registration Statement, with a copy to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., The Chrysler Center, 666 Third Avenue, New York, NY 10017, Attention: Faith Charles, Esq.;
provided, however, that any notice to an Underwriter pursuant to Section 7 shall be delivered or sent by mail or facsimile transmission to such Underwriter at its address set forth in its acceptance facsimile to the Representative, which address will be supplied to any other party hereto by the Representative upon request. Any such notices and other communications shall take effect at the time of receipt thereof.
Maxim Group LLC
June __, 2007
Page 40 of 42
Page 40 of 42
14. Governing Law. This Agreement shall be deemed to have been executed and delivered in New York and both this Agreement and the transactions contemplated hereby shall be governed as to validity, interpretation, construction, effect, and in all other respects by the laws of the State of New York, without regard to the conflicts of laws principals thereof (other than Section 5-1401 of The New York General Obligations Law). Each of the Underwriters and the Company: (a) agrees that any legal suit, action or proceeding arising out of or relating to this Agreement and/or the transactions contemplated hereby shall be instituted exclusively in the Supreme Court of the State of New York, New York County, or in the United States District Court for the Southern District of New York, (b) waives any objection which it may have or hereafter to the venue of any such suit, action or proceeding, and (c) irrevocably consents to the jurisdiction of Supreme Court of the State of New York, New York County, or in the United States District Court for the Southern District of New York in any such suit, action or proceeding. Each of the Underwriters and the Company further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the Supreme Court of the State of New York, New York County, or in the United States District Court for the Southern District of New York and agrees that service of process upon the Company mailed by certified mail to the Company’s address or delivered by Federal Express via overnight delivery shall be deemed in every respect effective service of process upon the Company, in any such suit, action or proceeding, and service of process upon the Underwriters mailed by certified mail to the Underwriters’ address or delivered by Federal Express via overnight delivery shall be deemed in every respect effective service process upon the Underwriter, in any such suit, action or proceeding. THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION STATEMENT, THE SALE PRELIMINARY PROSPECTUS AND THE PROSPECTUS.
Maxim Group LLC
June __, 2007
Page 41 of 42
Page 41 of 42
16. Severability. If any term or provision of this Agreement or the performance thereof shall be invalid or unenforceable to any extent, such invalidity or unenforceability shall not affect or render invalid or unenforceable any other provision of this Agreement and this Agreement shall be valid and enforced to the fullest extent permitted by law.
17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. Delivery of a signed counterpart of this Agreement by facsimile transmission shall constitute valid and sufficient delivery thereof.
18. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.
19. Time is of the Essence. Time shall be of the essence of this Agreement. As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.
20. No Fiduciary Relationship. The Company hereby acknowledges that the Underwriters are acting solely as underwriters in connection with the offering of the Company’s securities. The Company further acknowledges that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company, its management, stockholders, creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of the offering of the Company’s securities, either before or after the date hereof. The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect. The Company and the Underwriters agree that they are each responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the Underwriters to the Company regarding such transactions, including but not limited to any opinions or views with respect to the price or market for the Company’s securities, do not constitute advice or recommendations to the Company. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.
Maxim Group LLC
June __, 2007
Page 42 of 42
Page 42 of 42
Very truly yours,
RESPONSE GENETICS, INC.
By: ________________________________
Name:
Title:
Accepted by the Representative, acting for itself and as
Representative of the Underwriters named on Schedule A attached hereto,
as of the date first written above:
MAXIM GROUP LLC
By: _______________________________________
Name:
Title:
[Signature Page to Underwriting Agreement]
SCHEDULE A
Underwriters
Underwriter | Total Number of Firm Shares to be Purchased | Number of Additional Shares to be Purchased if Option is Fully Exercised |
Maxim Group LLC | ||
Caris & Company | ||
TOTAL |
ANNEX I
Form of Opinion of Company Counsel
All capitalized terms used but not defined in this Annex I shall have the meanings ascribed to such terms in the Underwriting Agreement to which this Annex is attached.
1. The Registration Statement has been declared effective by the Commission under the Securities Act, and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof has been issued and no proceedings therefor have been initiated or threatened by the Commission and all filings required by Rule 424(b) and Rule 430A under the Securities Act have been made in the manner and in the time period required therein.
2. The Registration Statement, the Sale Preliminary Prospectus and the Prospectus and any amendments thereof or supplements or exhibits thereto comply as to form in all material respects with the requirements of the Securities Act, the Exchange Act and the Rules and Regulations, except that we express no opinion as to the financial statements, schedules or other financial data included therein or excluded therefrom. To our knowledge, no contract or agreement is required to be filed as an exhibit to the Registration Statement that is not so filed.
3. The Company is validly existing as a corporation in good standing in accordance with and under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Registration Statement and the Prospectus. The Company is duly qualified and in good standing as a foreign corporation in the State of California.
4. The Company has full right, power and authority to execute and deliver the Underwriting Agreement and the Representative’s Warrant and all other Transaction Documents and to perform its obligations thereunder, and all corporate action required to be taken for the due and proper authorization, execution and delivery of the Underwriting Agreement, the Representative’s Warrant and all other Transaction Documents, and consummation of the transactions contemplated by the Underwriting Agreement have been duly and validly taken.
5. The Company has an authorized capitalization as set forth in the Registration Statement and the Prospectus. Except as set forth in the Registration Statement and Prospectus, all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable. The issuance of such securities is not subject to any statutory preemptive rights under the DGCL or the Certificate of Incorporation as in effect at the time of issuance or, to our knowledge, other similar rights of any securityholder of the Company.
6. The Shares to be delivered on the Closing Date and, as applicable, the Additional Closing Date, have been duly and validly authorized and, when issued and delivered by the Company against payment therefore in accordance with the Underwriting Agreement, will be validly issued, fully paid and non-assessable. The issuance of such securities is not subject to any statutory preemptive rights under the DGCL or the Certificate of Incorporation as in effect at the time of issuance of the Shares or, to our knowledge, other similar rights of any securityholder of the Company.
I-1
7. The Common Stock and the Shares conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus.
8. The shares of Common Stock underlying the Representative’s Warrant will, upon exercise of the Representative’s Warrant and payment of the exercise price thereof, be duly and validly issued, fully paid and non-assessable and, to our knowledge, will not have been issued in violation of or subject to preemptive or similar rights to subscribe for or purchase securities of the Company. The issuance of such securities is not subject to any statutory preemptive rights under the DGCL or the Certificate of Incorporation as in effect at the time of issuance or, to our knowledge, other similar rights of any securityholder of the Company (except for such preemptive or contractual rights as were waived).
9. Except as set forth in the Registration Statement and Prospectus, all private offers and sales of securities prior to the date hereof by the Company (other than private offers and sales undertaken while the Registration Statement was on file with the SEC, as to which we express no opinion) have been validly exempt from registration under the Securities Act.
10. The Company has not nor, to our knowledge, have any Affiliates of the Company, prior to the date hereof, made any offer or sale of any securities (other than private offers and sales undertaken while the Registration Statement was on file with the SEC, as to which we express no opinion) which are required to be “integrated” pursuant to the Securities Act or the Rules and Regulations with the offer and sale of the Shares pursuant to the Registration Statement.
11. The Underwriting Agreement and each other Transaction Document has been duly and validly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms.
12. To our knowledge, there is no legal or governmental action, suit or proceeding pending or threatened that is required to be disclosed in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus that is not so disclosed.
13. The execution, delivery, and performance of the Underwriting Agreement and the other Transaction Documents and consummation of the transactions contemplated thereby and the Registration Statement and the Prospectus do not and will not: (a) conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any indenture, mortgage, deed of trust, loan agreement or any other agreement, instrument, franchise, license or permit filed as an exhibit to the Registration Statement or described in the Prospectus or (b) violate or conflict with any provision of the Certificate of Incorporation or Bylaws of the Company, or, to our knowledge, any judgment, decree, order, statute, rule or regulation of any court or any judicial, regulatory or other legal or governmental agency or body having jurisdiction over the Company.
I-2
14. No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any judicial, regulatory or other legal or governmental agency or body, is required for the execution, delivery and performance of the Underwriting Agreement or consummation of the transactions contemplated by the Underwriting Agreement, the Registration Statement and the Prospectus, except for: (a) such as may be required under state securities or blue sky laws in connection with the purchase and distribution of the Shares by the Underwriters (as to which we need express no opinion), (b) such as have been made or obtained under the Securities Act and the rules and regulations of the NASDAQ Capital Market and (c) such as are required by the NASD (as to which we express no opinion).
15. The Company is not currently in violation of its Certificate of Incorporation or Bylaws.
16. The statements under the captions “Underwriting,” (only with respect to the description of the Underwriting Agreement) and “Description of Capital Stock,” in the Prospectus and Items 24 and 26 of Part II of the Registration Statement, insofar as such statements constitute a summary of the legal matters, documents or proceedings referred to therein, fairly present in all material respects the information called for with respect to such legal matters, documents and proceedings.
17. The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Registration Statement and the Prospectus, will not be, an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.
18. All members of the Company’s board of directors who are required to be “independent” (as that term is defined under applicable laws, rules and regulations), including, without limitation, all members of the audit committee of the Company’s board of directors, meet the qualifications of independence as set forth under applicable laws, rules and regulations.
19. The statements set forth under the captions “Business -- Regulation -- Food and Drug Administration” and “Business Regulation -- Good Laboratory Practice (“GLP”)” in the Registration Statement and the Prospectus, insofar as such statements purport to summarize applicable provisions of the Federal Food, Drug and Cosmetic Act (“FFDCA”) and the regulations promulgated thereunder, are accurate summaries in all material respects of the provisions purported to be summarized under such captions, and such statements summarize the provisions of the FFDCA that are material to the Company’s business.
20. The description of the Option And License Agreement USC File 2860 (“Option And License Agreement”) in the Registration Statement and the Prospectus conforms in all material respects to that agreement. The Option And License Agreement is enforceable in accordance with its terms.
I-3
In addition to the foregoing legal opinions, such counsel shall deliver to the Representatives at the Closing a letter contain the following statement (it being understood that such statement itself shall not constitute a legal opinion):
“In the course of the preparation and/or review of the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, we have participated in conferences and telephone conversations with your representatives and those of the Company, your counsel, the Company’s independent auditors, and certain officers and employees of the Company, during which conferences and conversations the contents of the Registration Statement, each Preliminary Prospectus and Prospectus and related matters were discussed. The limitations inherent in the independent verification of factual matters and the nature of the determinations involved in our review are such that we do not assume any responsibility for the accuracy, completeness or fairness of the statements made or the information contained in the Registration Statement, the Disclosure Package or Prospectus.
On the basis of the foregoing, we advise you that no facts have come to our attention that caused us to believe that either (i) the Registration Statement or any amendment thereto, at the time such Registration Statement or any such amendment became effective, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) the Sale Preliminary Prospectus or the Prospectus or any amendment or supplement thereto as of its date, at the time any such amended or supplemented prospectus was issued or on the date hereof, included or includes any untrue statement of a material fact or omitted or omits 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.
I-4
ANNEX II
All capitalized terms used but not defined in this Annex III shall have the meanings ascribed to such terms in the Underwriting Agreement to which this Annex is attached.
(i) We are familiar with the United States Patent and Trademark Laws (“Patent and Trademark Laws”) and related governmental regulations as applied generally to patents and trademarks of the nature under development by the Company and we have reviewed the sections of the Registration Statement, the Sale Preliminary Prospectus and Prospectus, including documents incorporated by reference therein, related to medical technologies of the nature under development by the Company (collectively, the “Intellectual Property Disclosure”);
(ii) Insofar as the statements in the Intellectual Property Disclosure constitute summaries of legal matters, documents, legal proceedings, or regulatory proceedings referred to therein, the Intellectual Property Disclosure accurately summarizes the information called for with respect to such legal matters, documents, legal proceedings, or regulatory proceedings and accurately summarizes the matters referred to therein;
(iii) To our knowledge, there are no legal or governmental proceedings relating to the Patent and Trademark Laws, or rules and regulations of the United States Patent and Trademark Office (“USPTO”) pending or threatened, to which the Company is a party, nor are we aware of any material violations of such laws, rules or regulations by the Company; and
(iv) As to the Intellectual Property Disclosure contained in each Registration Statement, the Sale Preliminary Prospectus and Prospectus, including documents incorporated by reference therein, we have no reason to believe that such Intellectual Property Disclosure, as of the effective date of the Registration Statement or as of the date hereof, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that such sections of the Prospectus or any amendment or supplement thereto, as of its issue date or as of the date hereof, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(v) To the best knowledge of such counsel, the Company owns, possesses or has adequate rights to use all intellectual property and rights thereto (collectively the “Intellectual Property”) reasonably necessary to conduct the business of the Company in the manner described in the Sale Preliminary Prospectus and the Prospectus, except to the extent that the failure to own, possess or have adequate rights to use such Intellectual Property would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(vi) Other than as set forth or contemplated in the Prospectus, to such counsel’s knowledge, the Company has not received any notice of infringement of or conflict with, and such counsel has no knowledge of any infringement of or conflict with, asserted rights of others with respect to the Intellectual Property, except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
II-1
(vii) Other than as set forth or contemplated in the Prospectus or as would not reasonably be expected to result in a Material Adverse Effect, to such counsel’s knowledge, the conduct of the current and future business of the Company in the manner described in the Sale Preliminary Prospectus and the Prospectus does not and will not infringe, interfere or conflict with any valid issued patent claim or other Intellectual Property right of any third party, or any claim of a patent application filed by any third party, which patent application has been published by the USPTO or similar foreign authority or is otherwise known to the Company and which claim would reasonably be expected to issue as a valid claim.
(viii) Other than as set forth or contemplated in the Prospectus, to such counsel’s knowledge no third party, including any academic or governmental organization possesses or could obtain rights to the patents, patent applications or patent rights of the Company which, if exercised, would allow such third party to develop products competitive with those of the Company and would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(ix) To the knowledge of such counsel all information material to patentability has been timely disclosed to the USPTO during the prosecution of all patent applications as to the Intellectual Property and no misrepresentation has been made to, or material information withheld from, the USPTO during such prosecution.
(x) Such counsel has no reason to believe that any of the Company’s trademark applications filed with the USPTO will not eventuate in registered trademarks.
In addition to the foregoing legal opinions, the opinion letter of regulatory counsel shall contain the following statement (it being understood that such statement itself shall not constitute a legal opinion):
“As counsel, we have participated in conferences with officers and representatives of the Company, representatives of the independent public accountants for the Company and the Underwriters at which the Intellectual Disclosure and related matters were discussed and, no facts have come to our attention which would lead us to believe that the Intellectual Property Disclosure, at the time the Registration Statement became effective (including the information deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable), contained or incorporated by reference any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the Intellectual Property Disclosure therein not misleading, or that the Intellectual Property Disclosure contained in the Sale Preliminary Prospectus and the Prospectus (including the documents incorporated by reference therein), as of the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.”
II-2
When used in this legal opinion, the term “knowledge” shall mean the knowledge of attorneys and paralegals of the Firm who have represented the Company, based on all information regarding the Intellectual Property Disclosure provided to the Firm by the Company, based on a Patent, Audit, and Diligence report containing a series of studies of the Company’s patent holdings and the relationship between the Company’s patents and products, and a state of the art and freedom to operate search through the USPTO, based on related patent search reports issued by the USPTO, based on related patent search reports issued by any foreign and international patent authority, and based on related trademark information received from the USPTO.
II-3
ANNEX III
Form of Lock-Up Agreement for Lock-Up Parties
_____________, 2007
MAXIM GROUP LLC
405 Lexington Avenue
New York, NY 10174
Re: Response Genetics, Inc. Lock-Up Agreement
Ladies and Gentlemen:
This letter agreement (this “Agreement”) relates to the public offering (the “Offering”) by Response Genetics, Inc., a company organized and existing under the laws of the State of Delaware (the “Company”), of shares of its common stock, par value $0.01 per share (the “Common Shares”). The Offering is governed by a certain Underwriting Agreement (the “Underwriting Agreement”), to be entered into by and between the Company and Maxim Group LLC (the “Representative”), as representative of the several underwriters named therein.
In order to induce the Representative to underwrite the Offering, the undersigned hereby agrees that, without the prior written consent of the Representative, which consent shall not be unreasonably withheld, during the period from the date hereof until and through the twelve (12) month anniversary of the closing of the offering contemplated by the Underwriting Agreement (the “Lock-Up Period”), the undersigned: (a) will not, directly or indirectly, offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, borrow or otherwise dispose of any Relevant Security (as defined below), and (b) will not establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” with respect to any Relevant Security (in each case within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder), or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration.
As used herein, the term “Relevant Security” means any Common Shares or other security of the Company thereof that is convertible into, or exercisable or exchangeable for Common Shares or equity securities of the Company or that holds the right to acquire any Common Shares or equity securities of the Company or any other such Relevant Security.
The undersigned hereby authorizes the Company during the Lock-Up Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, Relevant Securities for which the undersigned is the record holder and, in the case of Relevant Securities for which the undersigned is the beneficial but not the record holder, agrees during the Lock-Up Period to cause the record holder to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, such Relevant Securities.
III-1
The undersigned hereby further agrees that, without the prior written consent of the Representative, which consent shall not be unreasonably withheld, during the Lock-Up Period the undersigned will not: (x) file or participate in the filing with the Securities and Exchange Commission of any registration statement, or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document with respect to any proposed offering or sale of a Relevant Security and (y) exercise any rights the undersigned may have to require registration with the Securities and Exchange Commission of any proposed offering or sale of a Relevant Security.
Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer the Relevant Securities in the transactions described in clauses (i) through (vi) below without the prior written consent of Maxim, provided that (1) Maxim receives a signed lock-up agreement for the balance of the lock-up period from each donee, trustee, distributee, or transferee, as the case may be, (2) any such transfer shall not involve a disposition for value, (3) such transfers are not required to be reported in any public report or filing with the Securities and Exchange Commission, or otherwise during the lock-up period and (4) the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfers during the lock-up period:
(i) | as a bona fide gift or gifts; or |
(ii) | to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned; or |
(iii) | as a distribution to members, partners or stockholders of the undersigned; |
(iv) | to the undersigned’s affiliates or to any investment fund or other entity controlled or managed by the undersigned, provided that such affiliate, investment fund or other entity controlled or managed by the undersigned shall not be formed for the sole purpose of transferring, for value or otherwise, the Relevant Securities; or |
(v) | to any beneficiary of the undersigned pursuant to a will or other testamentary document or applicable laws of descent; or |
(vi) | to any corporation, partnership, limited liability company or other entity all of the beneficial ownership interests of which are held by the undersigned or immediate family of the undersigned. |
For purposes of this lock-up agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.
Furthermore, notwithstanding the foregoing, during the lock-up period, the undersigned may sell shares of Common Stock of the Company purchased by the undersigned on the open market following the Public Offering if and only if (i) such sales are not required to be reported in any public report or filing with the Securities Exchange Commission, or otherwise and (ii) the undersigned does not otherwise voluntarily effect any public filing or report regarding such sales.
III-2
The undersigned hereby represents and warrants to the Representative and the Company that the undersigned has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Upon request, the undersigned will execute any additional documents necessary in connection with enforcement hereof. Any obligations of the undersigned shall be binding upon the successors and assigns of the undersigned from the date first above written.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of laws principles thereof. Delivery of a signed copy of this letter by facsimile transmission shall be effective as delivery of the original hereof.
Very truly yours,
_____________________________
III-3